Latin America and the Caribbean Technical Department Regional Studies Program Report No. 42 Pursuit of Sustainable Energy Development in the Americas: A Look at Recent Progress by Dan Biller and Suzanne Maia Environment Unit November 1996 Papers in this series are not formal publications of the World Bank. They present preliminary and unpolished results of country analysis or research that is circulated to encourage discussion and comment; any citation and the use of this paper should take account of its provisional character. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, its affiliated organizations, members of its Board of Executive Directors or the countries they represent.  Pursuit of Sustainable Energy Development in the Americas: A Look at Recent Progress Dan Biller and Suzanne B. Maia November 1996 Technical Department Latin America and the Caribbean Regional Office The World Bank  CONTENTS Abbreviations and Acronyms ........................................iv Acknowledgments................................................. v Abstract ....................................................... vii I. Background: The Impact of Energy on Sustainable Development Goals ...... I II. Political Convergence: Promoting Sustainable Development in the Americas .... 3 A. The 1994 Summit of the Americas: Energy Action Plan......... .................. 4 1. Outcomes and Implementation Activities of Energy Action Items 12 and 21 2. The Bolivian Summit of the Americas: Proposed Initiatives to Enhance Support of Energy Efficiency, Renewable Energy, and Energy Integration Activities in the Americas B. National Initiatives that Complement Hemispheric Goals................. 12 III. Promoting Energy Efficiency in the Americas......... .....................13 A. Technical Applications and Technology Issues: Advances in Energy Efficiency.. 14 1. Technologies 2. Techniques 3. Energy Efficiency Programs in the Americas IV. Renewable Energy: Options for Growth ............................... 19 A. Recent Evolution in Renewable Energy Applications........................ 19 B. Advances and Applications. .....................................20 C. Priorities with Significant Impacts on Sustainable Development .. ............25 V. Other International Activities Supporting Hemispheric Progress Toward Sustainable Energy Development ............... ......26 A. Addressing Global Environmental Issues Through Actions and Strategies on the Energy Front ...................26 1. Similar Programs Sponsored Under Other International Fora (UN, IPCC) 2. The World Bank and Other Programs Bibliography .................................................... 33 Tables 1. Follow-up Meetings and Events to 1994 Miami Summit of the Americas...... 5 2. Comparative Cost Features .................................... 24 iii Abbreviations and Acronyms CONPET Programa Nacional para o Uso Racional de Derivados de Petr6leo CO Carbon monoxide CO2 Carbon dioxide ESMAP Energy Sector Management Assistance Programme EU European Union FCCC United Nations Framework Convention on Climate Change GCC Global climate change GHG Greenhouse gas GW Gigawatt GWh Gigawatt-hour IDB Inter-American Development Bank IEN Industry and Energy Department IENOG IEN Oil and Gas Division IENPD IEN Power Development, Efficiency and Household Fuels Division IPCC Intergovernmental Panel on Climate Change kW Kilowatt kWh Kilowatt-hour LAT LAC Technical Department LAC The Latin America and the Caribbean Regional Office of the World Bank LATAD LAT Advisory Group LA31N LAC Country Department III, Infrastructure Division MW Megawatt MWe Megawatt electric MWh Megawatt-hour MWp Peak megawatt NOx Nitrogen oxide NGO Nongovernmental organization OLADE Latin American Energy Organization PROCEL Programa de Conservaqfo de Electricidade SO2 Sulfur dioxide UNCED United Nations Conference on Environment and Development UNDP United Nations Development Programme UNEP United Nations Energy Programme Wp Peak watt iv Acknowledgments The authors of this paper, Dan Biller and Suzanne B. Maia, work in the Latin America and the Caribbean Regional Office (LAC) of the World Bank. Mr. Biller is an economist in the LAC Technical Department's Environment Unit. Ms. Maia, an energy consultant, is currently assigned to the LAC Infrastructure Resource Center. Senior authorship is not assigned. Many of the concepts of this paper have been the result of numerous exchanges with various experts in the World Bank. Among these experts, the authors wish to acknowledge the contributions and comments of Rafael A. Moscote (LATAD), Anke Meyer, Willem Floor, Joseph Gilling (IENPD), Chakib Khelil (IENOG), Joerg-Uwe Richter (LA31N), and Ernesto Terrado (IENPD), who provided important data on energy applications and costs. The initiatives proposed herein were forged as part of consensus-building exercises in preparation for the Hemispheric Summit Conference on Sustainable Development in Santa Cruz, Bolivia, to be held in December 1996. A major milestone in consensus building occurred at a meeting of numerous Latin American energy ministers held in Santa Cruz, Bolivia from July 31 to August 2, 1996. Other participants in this event included officials from the World Bank and other multilateral institutions, nongovernmental organizations, and private sector interests. The gathering provided an opportunity to present, discuss, and build common ground on the presented initiatives and issues relevant to the energy agenda for the forthcoming summit. In addition, the authors thank Sri-ram Aiyer, Director of the LAC Technical Department (LAT), and William Partridge, Chief of the LAT Environment Unit, for their comments and enduring support of this effort. v  Abstract There are two visible areas of progress in sustainable energy development in the Americas. One, by far the more tangible, is the evolution of various renewable and other clean energy technologies and notable (multisectoral) advances in energy efficiency. The other area of progress has been in the discernible movement of Latin American governments toward jointly identifying and implementing a framework that fosters sustainable energy development in the hemisphere. At another level, this effort at concerted action in the hemisphere is further supported by a multitude of international fora working to address global environmental issues through similar actions and strategies on the energy front. These movements are converging as governments, citizens, and investor interests find increasing rewards in being economically and technically efficient and sustainable in all aspects of energy development. This paper presents a synopsis of how the intertwining issues of sustainable economic and energy development are evolving in the Americas. It focuses on the recent activities and initiatives promoting hemispheric cooperation on this theme and on strategies for sustainable energy development in the hemisphere, particularly those using energy efficiency and renewable energies, and on recent technological progress in these two areas. The paper also identifies several important global and institutional activities that broadly support the energy initiatives being undertaken in the Americas. The paper and the initiatives it proposes were forged as part of consensus-building exercises in preparation for the Hemispheric Summit Conference on Sustainable Development to be held in Santa Cruz, Bolivia in December 1996. A major milestone in consensus building occurred at a meeting of numerous Latin American energy ministers held in Santa Cruz, Bolivia from July 31 to August 2, 1996. Other participants in this event included officials from the World Bank and other multilateral institutions, nongovernmental organizations, and private sector interests. The gathering provided an opportunity to present, discuss, and build common ground on the presented initiatives and issues relevant to the energy agenda for the forthcoming summit. vii  I. Background: The Impact of Energy on Sustainable Development Goals Sustainable economic development has become a priority issue on the global agenda, and energy-that is, access to reliable energy sources at reasonable cost-has been clearly identified as a fundamental requirement to achieve it. Ready access to natural gas, electricity, or other modem energy forms has a tremendous impact on prowth in the industrial/manufacturing, transportation, agricultural, and commercial sectors. In households it is fundamental for meeting basic lighting, heating/cooling, and refrigeration needs in a clean, cost-effective way. By increasing access to modem energy supplies, governments help to reduce the labor and pollution associated with traditional fuel use and thus improve human health, safety and other . . .2 socioeconomic conditions. Providing modem energy to those who do not already have connected service is not simple. The magnitude of the task is enormous. In a recent study undertaken by the World Bank, an estimated two billion people are living without access to modem energy forms.3 In the Americas alone, where one might argue that the population has greater energy access than in other developing regions, tens of millions of people lack basic energy services and therefore face enormous hurdles on the path to development. For example, despite an electricity service coverage level of roughly 88 percent, an estimated 20 million people lack fundamental energy services in Brazil.4 Even without considering provision of new energy services, most developing countries are confronting significant (and growing) energy infrastructure investment needs as their economies expand and existing facilities become obsolete. They also face a lack of fiscal resources and limited access to capital needed for major energy infrastructure investments. As a result, many countries have turned to the less capital-intensive energy efficiency and conservation programs rather than build new energy production facilities. These programs, with widespread applications and ambitious objectives, have undergone significant technological and technical improvements in recent years. Although they may alleviate or delay some of the pressure to invest in new energy supplies, energy efficiency and 1. Modem energy is generally defined as electricity, coal, liquid petroleum-based fuels (including liquefied petroleum gas), kerosene, and natural gas. 2. For example, using modem energy forms instead of wood, charcoal, peat, and dung for cooking can alleviate high levels of indoor air pollution. 3. "Rural Energy and Development: Improving Energy Supplies for 2 Billion," IEN, World Bank Best Practice Paper, Rept. No. 15912-GLB, The World Bank, July 1, 1996. 4. Source: "PRODEEM: Energy for Social and Rural Development," Minist6rio de Minas e Energia-Secretaria de Energia, Departamento Nacional de Desenvolvimento Energdtico, Brasilia, 1996. 2 LA T Regional Studies Program Report No. 42 conservation programs are not, however, sufficient to unilaterally support the fast-growing energy requirements of developing countries, especially those with burgeoning populations. Overall energy production must increase in order to support economic expansion and improve the quality of living for the population, particularly for social groups who are normally in the margin or fringes of the economy. With economic growth at stake, many governments are launching macroeconomic restructuring and sectoral reform initiatives that aim to attract private investment, encourage efficiency at all levels, and foster new financing mechanisms to meet fundamental needs in energy and other vital sectors. On the other hand, the social and economic costs of environmental degradation related to energy use have become increasingly apparent in urban centers, industrial areas, within defined regions, and across national boundaries. These are manifested in human health problems related to smog, industrial or vehicular air emissions, and indoor air quality. They are also evident in the loss of land and water uses and declines in tourism and agricultural output. Other associated costs include detrimental impacts on productivity, human habitats, and availability of natural resources for future generations. Over the past decade, awareness of the interrelationship between sustainable development, energy, and the environment has risen on the individual, national, and global level. Consequently, sustainable economic development has been increasingly linked to global environmental goals, namely the reduction of carbon dioxide and other greenhouse gas emissions, as well as to regional and national environmental considerations related to emissions of sulfur dioxide, nitrogen oxides, and particulates, and the contamination of water and land resources. In light of the considerable cross-border environmental impacts and overall externalities of energy development, the need to promote sustainable energy development and utilization in an environmentally sound manner on a regional or global basis appears even greater.5 Toward this end, across-the-board, cost-effective improvements in energy efficiency, accelerated development of renewable energy sources, and increasing application of clean energy technologies for new installations are being emphasized at the international level. Meanwhile, governments have become increasingly involved in efforts to reduce the negative environmental impacts derived from energy development programs and other economic activities. These efforts are undertaken unilaterally, through national environmental conservation policies and programs, as well as through actions taken in the energy and industrial sectors, and to some extent, bilaterally. More remarkably, however, there are a number of cooperative activities on this front occurring at the multilateral level, promulgated under various international treaties, protocols and other agreements. International cooperation in the realm of energy, environmental, and sustainable development issues appears to be gaining favor as nations pool their resources to seek creative, cost-effective solutions for the problems they commonly face. Sharing timely information on best practices, new or evolving 5. "Externalities" occur when actions by one or more agents affect another agent, positively or negatively, without the latter being able to influence the level of the effect. Pursuit of Sustainable Energy Development in the Americas 3 technologies, financing mechanisms, and other issues is emerging as a vital area of international cooperation. Access to current information on this type of issue can have a major impact on investment decisions, technology selection, competition, energy trade opportunities, and energy utilization and consumption trends. At the national level, achieving sustainable development while applying meaningful measures to promote energy efficiency and reduce environmental degradation also entails the consideration of macroeconomic policy changes as well as improvements in the sector's regulatory and institutional frameworks. Moreover, environmentally sound energy policies have to be financially sustainable in order to endure. This path may require changes that primarily address energy pricing issues, with the goal of bringing energy prices in line with their full costs-which include social and environmental costs-and remove consumption- based subsidies to energy consumers in order to give the correct signal on the value of energy and energy savings. In addition, providing incentives for investors to choose cleaner or more efficient energy technologies despite higher capital costs and a longer payback period for the 7 investment may be necessary. This paper intends to present a synopsis of how the intertwining issues of sustainable economic and energy development are evolving in the Americas. Section II focuses on the recent activities and initiatives promoting hemispheric cooperation on this theme, beginning with the 1994 Summit of the Americas in Miami and covering the ongoing preparations for the Hemispheric Summit Conference on Sustainable Development to be held in Bolivia in December 1996. Strategies for sustainable energy development in the hemisphere include greater deployment of energy efficiency and renewable energy programs. Sections III and IV look at the recent technological progress in these two areas, respectively, and include some examples of their application at the national level. Section V identifies numerous other global and institutional activities that broadly support the energy initiatives being undertaken in the Americas. II. Political Convergence: Promoting Sustainable Development in the Americas The Miami Summit of the Americas held in December 1994 served to launch a new round of activities based on hemispheric cooperation. A multipronged approach to commonly strive for greater political stability, regional security, social equity and welfare, and environmental conservation, among other goals, was adopted by summit participants. To achieve sustainable development, the attendees invoked some overarching themes-such as regional economic 6. "Financial sustainability through [energy] sector reform and sound pricing are prerequisite for environmental sustainability." R.A. Moscote, The World Bank, in a presentation entitled "Energy and Environment Issues: An Overview," given at ENERLAC '96, Rio de Janeiro, Brazil, June 1996. 7. If subsidies are considered for policy reasons, they should not be applied to energy consumption but rather to the initial capital costs associated with connecting customers to supply networks. Subsidies may also be appropriate for an interim period to help with the monthly connection charge for new customers. 4 LA T Regional Studies Program Report No. 42 integration, market and pricing liberalization, innovative financing sources and tools, and enhanced private sector participation-as policy areas to be addressed. Specific targets were indicated for the energy, forestry, water, and biological diversity themes. The participating governments concluded the landmark meeting with official statements acknowledging that countries in the hemisphere face common problems and goals regarding the achievement of sustainable development, and that joint cooperation on specific aspects could yield significant benefits for all. The 1994 summit gave rise to a number of other activities at the hemispheric level related to the application of certain energy strategies. This section reviews the Miami Summit's energy themes, and traces the evolution of subsequent hemispheric activities born of the 1994 event. Significant progress in hemispheric cooperation has been achieved, which is expected to be further consolidated at the Santa Cruz (Bolivia) Summit Conference on Sustainable Development in December 1996. A. The 1994 Summit of the Americas: Energy Action Plan The Plan of Action signed by thirty-four heads of state and government participating in the Miami Summit included two items that specifically pertained to energy: Item 12, "Energy Cooperation" and Item 21, "Partnership for Sustainable Energy Use." Both of these items aim at achieving sustainable energy use that promotes economic development while conserving the environment. Item 12 notes the new era of economic growth in the hemisphere, to be nurtured through greater economic cooperation among countries of the region, freer trade, open markets, and wider cooperation in energy development areas. Hemispheric cooperation intends to enable the tapping of all available and viable energy resources within the region for sustainable development purposes, and advance energy efficiency and renewable energy development. Item 12 also envisions that hemispheric cooperation will help optimize financing mechanisms and encourage capital investment in energy efficiency and renewable energy areas as well as in the energy sector as a whole. Item 21 similarly supports the utilization of clean, reliable, and least-cost energy to meet the needs of sustainable development (including development via rural energy programs), and calls upon governments to promote energy efficiency and renewable energy sources as integral components of their energy strategy. Subsequent to and as a result of the Miami Summit, a dynamic process to implement the plan of action was launched in the hemisphere. The efforts made through this process are themselves progressive steps in hemispheric cooperation and have produced the following results. 1. Outcomes and Implementation Activities ofEnergy Action Items 12 and 21 Numerous technical and a couple of ministerial-level meetings have been held since the Miami Summit to discuss issues relevant to the execution of the summit's action plan items 12 and 21, which have been integrated into one initiative for implementation purposes. In addition, several conferences provided other opportunities for members of the working groups and committees formed to craft and carry out implementation programs. The main events and activities among these are listed and briefly described in the following table. Pursuit of Sustainable Energy Development in the Americas 5 Table 1. Follow-up Meetings and Events to 1994 Miami Summit of the Americas Event Date, Location, Brief Description Institute of the Americas May 1995, La Jolla, Calfornia. The next phase of activities and other Energy Conference summit energy implementation issues were discussed at a roundtable. Central America Workshop June 1995, Costa Rica. Facilitated discussions on domestic joint on Joint Implementation implementation programs and project partnerships. Hemispheric Trade and July 1995, Denver, Colorado. An opportunity to review barriers to energy Commerce Forum, Energy trade and investment in the hemisphere. Sessions Inter-American Petroleum October 1995, Dallas, Texas. Committee members worked on natural gas & Gas Conference development and privatization issues. Hemispheric Energy October 1995, Washington, DC. Ministers from twenty-six countries Symposium approved a plan to cooperatively pursue energy development in the hemisphere as part of the 1994 summit implementation activities. Among the forty areas targeted for cooperation were: regulatory training;a inputting of national energy and environmental laws and other legal documents, as well as resource bases and priority projects, into shared databases; energy efficiency policy formulation; and identification and promotion of replicable rural electrification projects. A Hemispheric Energy Steering Committee was created, which organized working groups around the symposium's eight outcomes.b Various multilateral institutions, NGOs, and private sector entities also participated. Steering Energy 1996, various locations. To review progress and establish the next set of Committee meetingsC steps or follow-up activities. Hemispheric Ministerial July 31-August 2, 1996, Santa Cruz, Bolivia. Reports to ministers Meeting on Energy Issues regarding progress on implementing Miami Summit action plan. Discussion of opportunities for higher level discussion on next steps. Hemispheric Summit December 1996, Santa Cruz, Bolivia. To agree on specific initiatives for Conference on Sustainable joint cooperation on energy and other fronts. Development a. Training programs are being formulated to provide information on: regulatory skills, directions, and experiences; and experiences with contract solicitations, public share offerings, and other financing issues. b. The symposium, hosted by the U.S. Department of Energy and the Venezuelan Ministry of Energy and Mines had eight goals or outcomes: 1) Increase Investment in the Energy Sector (U.S. Chair); 2) Promote Clean Energy Technologies in Electric Power Markets (OLADE Chair); 3) Advance Regulatory Cooperation in the Hemisphere (Argentina Chair); 4) Increase the Economic and Environmental Sustainability of the Petroleum Sector (Venezuela Chair); 5) Create New Opportunities for Natural Gas (Bolivia Chair); 6) Make Energy Efficiency a Priority Throughout the Hemisphere (Brazil Chair); 7) Develop Workable Hemispheric Rural Electrification Strategies (Chile Chair); 8) Advance Joint Implementation Efforts in the Hemisphere (U.S. Chair). c. The steering committee's subgroups have also undertaken various activities at the hemispheric level, including hiring consultants to perform studies and working on specific issues. For example, the petroleum subgroup and its task force teams met several times in 1996 on issues related to the design and implementation of a resource and production database and an environmental database, "rules of engagement" at the national level, harmonizing fuel product specifications, and promoting capital investment, while the natural gas subgroup held workshops on creating regulatory databases and on natural gas utilization opportunities. 6 LA T Regional Studies Program Report No. 42 2. The Bolivian Summit of the Americas. Proposed Initiatives to Enhance Support of Energy Efficiency, Renewable Energy, and Energy Integration Activities in the Americas To promote energy issues within the larger context of sustainable economic development in the hemisphere, four main initiatives have been proposed as appropriate areas of cooperation to be considered by heads of governments when they convene in Santa Cruz, Bolivia in December 1996. These initiatives, presented in greater detail in the following section, are: Initiative 1. Develop Cross-Sectoral Energy Efficiency and Conservation Policies/Programs. Initiative 2. Foster the Utilization of Renewable Energy Sources. Initiative 3. Increase Overall Information-Sharing. Initiative 4. Develop Regional, Subregional and Bilateral Energy Trade and Markets. At the Hemispheric Ministerial Meeting on Energy Issues (Santa Cruz, July 31-August 2, 1996), one of the many events held to prepare the agenda for the Santa Cruz summit, an important threshold was crossed. Along with a review of the assistance being provided to support previously approved hemispheric efforts in the energy arena, presentations were made at this gathering of energy ministers-the first such high-level meeting since the Hemispheric Energy Symposium in October 1995-outlining the thematic energy initiatives being prepared for the December summit by the participating multilateral institutions, nongovernmental organizations (NGOs), and other parties. As confirmed during the consensus-building opportunity and embodied in the joint declaration at the end of the ministerial meeting, the proposed energy initiatives uphold the common commitment to carry out sustainable development in the hemisphere-with due care to human, social, economic, and other welfare considerations-while preserving the environment for present and future generations. To this end, the region's governments and the private sector will work together to extend and improve access to clean and competitive energy sources through rural energy programs, energy efficiency, and greater use of renewable energy and other clean fuels or technologies. These goals will commonly be supported by efforts to enhance investment and private participation in the energy sector and through information-sharing programs covering technical, technological, financial, and regulatory issues that are central to the theme of investing in human and natural capital in a sustainable manner. As of the publication date of this paper, it appears that the initiatives have been basically unchanged in the course of incorporating them into the summit agenda. It is cautioned, however, that the agenda is still subject to change and that the initiatives actually presented to the summit conferees may be different from those in the following descriptions. = Initiative 1. Develop Cross-Sectoral Energy Efficiency and Conservation Policies/Programs. Background. There are many programs and technologies that propose to foster energy efficiency in multiple sectors and uses. These include building efficiency programs; lighting replacement programs, ongoing design efforts to develop more efficient engines, boilers, systems, materials, instrumentation and controls, and other components used in the industrial, power and transportation sectors; cogeneration technology; fuel enhancement; efficiency Pursuit ofSustainable Energy Development in the Americas 7 targets and labeling for household appliances; and metering applications. In addition to new technologies in the research and development and initial commercialization stages, ranging from energy storage technologies to transportation systems,8 there are ongoing evolutionary improvements in existing technology in energy extraction, production, transmission, distribution, and utilization functions. These serve to not only conserve energy, but also to reduce pollution, material inputs, costs, and other impacts. It is also acknowledged that many "good housekeeping" practices in industrial, commercial, and residential applications can help to improve energy efficiency, thereby conserving fuel/energy and diminishing the pace and degree of environmental degradation. The key to successful implementation of energy efficiency programs on a sustainable and meaningful basis, however, is dependent on the economic pricing of energy. Alternatively, the provision of economic incentives (for example, tax exemptions or taxes on British thermal units or consumption) is important to partially or fully cover the external costs associated with energy production requirements (current and anticipated), such as environmental or mitigation costs, social costs (resettlement, health care), and so forth. Another critical issue is the removal of energy subsidies, which tend to encourage wasteful consumption of energy at all levels. This is another target clearly stated at the Miami Summit. Energy efficiency and conservation programs and policies will be most effective if targeted at energy production, transportation, and utilization functions in all relevant sectors and industries (transportation, agricultural, industrial, manufacturing, commercial, and residential), which will all benefit directly and indirectly from the expected savings.9 The cost of inefficiently produced or utilized energy is most significant when related to nonrenewable energy forms. Currently, unless externalities are incorporated, the costs associated with the consumption of exhaustible resources are comparatively less than those for renewable resources (although the latter also entail environmental impacts). Generally, renewable energy resources are still considered financially less attractive. In addition, they face considerable market barriers largely because the information on its forms and applications is not readily available to potential users. Since exploiting exhaustible resources implies a cost to future generations who will have a smaller stock of these fuels for their use, and since the use of these resources generally entails unaccounted for environmental costs related to emissions, effluents, and the use of other valuable resources (such as water and land), the need to use these resources in an efficient 8. For example, one promising technology on the horizon is electric linear-induction driven freight tube systems, such as Subtrans or Tubexpress. See "Subtrans: Automation for Freight Transportation" and accompanying note, "The Future of Our Transportation Infrastructure" presented by William Vandersteel (Ampower) at "Connections: The Change of Multimodal Transportation," Third Annual Greater Seacoast Economic Summit, June 1-2, 1993. 9. See Section III. Collective energy savings from efficiency measures helps to delay investment in new plants, and these delays may enable planners to incorporate improved (energy) technologies, thus providing even greater savings over time. Individually, most energy efficiency programs generally have relatively short payback periods. 8 LA T Regional Studies Program Report No. 42 manner is particularly important. To assist in changing this situation and promote energy efficiency, it is important to appropriately price resources, which includes taking into account the externalities caused by the production and use of exhaustible energy resources. Detailed Initiatives: 1.1 Provide the Necessary Framework and Tools * At a ministerial level, carefully define the desired goals for energy savings or efficiency improvements on a regional/sub-regional level, involving all key ministries of the signatory countries. This will also contribute to the goals stated in Agenda 21 and the Framework Convention on Climate Change to address environmental concerns and increase use of least- cost energy options. * Support market-based pricing that serves to promote the achievements of energy efficiency programs on a sustainable and meaningful basis. * Based on a clear understanding of the array of applicable mechanisms and necessary program checkpoints, consider other appropriate pricing mechanisms or tax policies that encourage the use of energy efficiency measures in various sectors and in industrial, commercial and residential applications. * Foster the use of environmental policy instruments, particularly economic incentives, that mitigate external effects. 1.2 Promote Shared Knowledge and Training * Share information on energy efficiency applications and potential in the hemisphere, as well as the value of the subsequent savings, for both the supply- and demand- sides of the energy balance. Share the knowledge contained in various assessments already conducted in the region on industries and areas suitable for energy efficiency applications, on both the supply- and demand-side, by circulating said assessments among signatory countries of the Miami Summit and to the task committees in charge of promoting the Summit's eight outcomes. * Provide training on relevant regulatory, pricing and policy tools for energy efficiency programs through workshops and other events based on actual program experiences for the appropriate country officials. Initiative 2. Foster the Utilization of Renewable Energy Sources. Background. Previously, evaluations of renewable energy projects have been largely focused on capital investment requirements. This narrow focus has rendered most renewable energy sources financially unattractive. Except in isolated regions where the population does not benefit from interconnected energy services (such as oil, gas, or electricity services) or where regulations, tax incentives, subsidies, or other mechanisms have created enabling conditions (for example, in California), it has been difficult for renewable energy technologies to compete effectively with traditional exhaustible energy sources. Over the years, however, renewable Pursuit of Sustainable Energy Development in the Americas 9 energy technologies have greatly improved their quality, capacity, and applicability while reducing their investment requirements and maintenance costs. Deployment of solar, wind, mini-hydro, geothermal, and biomass energy production systems in rural and isolated areas has become more common.10 This is largely the result of government programs to aggressively pursue electrification goals. With this experience has come better knowledge about how and where these systems are most successfully applied and where they are definitely competitive with conventional energy options. In many cases, project costs for renewable energy technologies, though high per installed energy unit, are nonetheless worthwhile if other local energy sources are limited or if there is no interconnection to developed modern energy systems. In remote areas, the availability of modern energy (such as electricity, natural gas, or liquefied petroleum gas) sources is generally seen as directly assisting the viability of other economic and social infrastructure, including critical educational and health programs and facilities, potable water and irrigation systems, telecommunications services, and the development of industries and services that provide added value to local products (food processing plants, textile mills, wood products, etc.). There is a clear role for the promotion of renewable energy technologies in the Americas. The governments can help support the development of local and subregional programs utilizing these technologies by undertaking the following activities. Detailed Initiatives: 2.1 Remove Barriers to Renewable Energy Development * Create positive policy, regulatory, and institutional settings for sustainable renewable energy projects that are desirable in terms of social and economic policy and are economically and technically feasible. * Reduce policy, regulatory, and institutional impediments for technology vendors, project developers, and local governments pursuing sustainable renewable energy project development. * Foster energy pricing that incorporates externalities, thus identifying more clearly the renewable energy sources that are most competitive vis-a-vis traditional fuels/sources. * Support efforts to catalog potential renewable energy resources in local and remote areas that can be tapped for development in a technically and economically sound manner. 2.2 Encourage Use of Available Assistance * Optimize use of existing multilateral institutions, NGOs, and bilateral assistance programs which offer funding and technical assistance for the initiation of renewable energy projects. 10. See Section IV. In urban areas, municipal waste-to-energy systems present another alternative energy option. 10 LA T Regional Studies Program Report No. 42 = Initiative 3. Increase Overall Information-Sharing. Background. A major impediment to bringing about changes in the way of doing business is often based on the lack of adequate information on why and how the changes signify an improvement over existing conditions. In order to remove this particular barrier and to expedite learning, the sharing of technical, institutional, economic, managerial, and operational information is critical, especially for leaders and managers closely involved in promoting energy efficiency and conservation/least-cost energy programs. Detailed Initiatives: 3.1 Optimize the Learning Process * Establish an information center in an existing hemispheric institution. The center will use state-of-the-art technology (database capabilities, scanning equipment, internet and web-site facilities, etc.) to rapidly receive and disseminate information on programs, technologies, potential financing, and sources for technical support. Information to be disseminated could include: - descriptions of existing financing mechanisms and new financing tools, including discourse on their adequacy to meet current and anticipated program needs, responsiveness, and their flexible application; and - tracking of sustainable energy development projects or programs in the Americas with regard to their components, their elements of success, their limitations, and ways to improve them or to apply them to other initiatives. 3.2 Provide Opportunities to Modify or Expand the Center's Activities * At annual hemispheric meetings, schedule a review by high-level officials of the ongoing country requirements in energy efficiency program areas to determine whether the information service is providing relevant and valuable input as it is configured, and to redesign or update the short- and medium-term program goals. = Initiative 4. Develop Regional, Subregional and Bilateral Energy Trade and Markets. Background. Over the past decade there has been a marked increase in cooperation between countries in the hemisphere, as well as a trend toward subregional and regional integration in targeted market areas. Among the most prominent expanded trade zones are the North American Free Trade Agreement, Southern Cone Market, and Andean Pact. Eventual goals are to integrate markets on a bilateral, subregional and hemispheric basis to the extent that such efforts foster peace and political stability, economic growth, social development, and other benefits, including enhanced conservation of natural resources and the environment. In addition to these broad trade initiatives, there are imminent prospects for increased energy trade in the region. This is because the countries that are virtually self-sufficient in energy Pursuit of Sustainable Energy Development in the Americas I I (e.g., Canada, Mexico, Venezuela, Bolivia, Uruguay, Paraguay, Argentina) and have an excess of commercially viable energy are expected to divert increasing quantities of these commodities to export markets. Logically, as part of the recent political and economic cooperation efforts among countries of the region, the energy exporting nations are looking more closely at energy trade opportunities with neighboring countries or other markets within the hemisphere. Although this is positive for regional trade and integrated markets in energy, development of regional trade and markets in energy areas in the hemisphere have experienced considerable delays and have mostly been limited to specific transactions or joint projects on a bilateral basis. The development of increased regional trade and integrated markets for energy and other tradable goods as a means of promoting sustainable economic growth is therefore under active discussion as an area for hemispheric cooperation. To foster more rapid progress in this area, the following initiatives are proposed. Detailed Initiatives: 4.1 Expedite the Development of Regional Trade and Markets in Energy Goods and Services * Undertake discussions in appropriate committees and with government ministry officials on the specific types of policies, trade actions, laws, tariffs, regulations, and institutional structures needed to expedite expansion of bilateral and interregional energy trade within the hemisphere. * Call upon the governments attending the Hemispheric Summit Conference on Sustainable Development (Santa Cruz, Bolivia) to establish a multinational task force to propose country-specific actions within a given time frame that would enable or foster regional or subregional energy trade. This set of proposals should focus on: - taking logical steps in macroeconomic level programs and policies (fiscal, investment, commercial, monetary, and exchange rate policies) to reduce barriers and provide a level playing field for the maximum number of potential participants in international energy markets; - ensuring that the rules of the games for the domestic energy market structure and entry do not preclude or unfairly disadvantage competitive suppliers or technologies from other countries; - moving towards market-based pricing; - directing economic tariff regulation at monopolistic areas of the market, using clearly defined and transparent pricing elements and formulae; - including measures that would advance the provision of adequate energy supplies to indigenous or needy segments of the population to improve basic standard of living levels or enable sustainable economic development programs at the local level; - optimizing opportunities for investments that improve economic competitiveness; - facilitating investments that lead to reduced pollution or that arrest environmental degradation; and 12 LA T Regional Studies Program Report No. 42 - highlighting measures (policies, laws, regulations, treaties, and other legal and institutional tools or mechanisms) that will foster rational energy use and economic efficiency. Beyond the activities being pursued at the hemispheric level, individual countries in the Americas are implementing policies and programs that are fundamentally following the same track toward sustainable development goals in the energy arena. Some of these are described in the following paragraphs. B. National Initiatives that Complement Hemispheric Goals There are several countries in the hemisphere which have launched energy efficiency programs, renewable energy initiatives, and other efforts to achieve reliable, reasonably priced energy supplies and provide basic energy services as part of sustainable development policy. Some of the more enduring and advanced programs are in the United States, Canada, and Brazil. Descriptions of selected national programs in energy efficiency and renewable energy areas are presented in sections III and IV, respectively. However, to enable energy efficiency and renewable energy options to be pursued in a competitive energy sector framework or with significant private sector financing requires a suitable macroeconomic framework. Among other featured elements, this framework should provide good prospects for growth, political, economic, and monetary stability, an acceptable tax and investment regime, and investor perceptions of low political risks. More than half of the countries in the hemisphere have undertaken some level of energy sector reform, although the scope and substance of the reforms vary considerably." In general, however, reforms have focused on opening the energy sector to private sector participation, competition, restructuring (unbundling of functions and broader ownership), market-based pricing and tariff reform, and changes in the legal, regulatory, and institutional frameworks for the sector that reflect and support these changes. Throughout the hemisphere, then, the national sector reform programs planned, underway, or implemented have taken on even more critical significance for enabling energy efficiency and renewable energy options and for opening energy markets to international trade opportunities. Even after undertaking reforms, not many of the countries in the hemisphere have the requisite energy sector institutional or regulatory framework, market structure, or open investment and trade policies in place to support the fullest range of energy options available in the marketplace. Some have progressed considerably and function reasonably well in this regard, but all countries have areas of improvement that can yet be made. This provides a common 11. For more details on reforms undertaken in the power sector, see "Reforms and Private Participation in the Power Sector of Selected Latin American and Caribbean and Industrialized Countries," LAT Regional Studies Report No. 33, The World Bank, March 1994, and "The Power Sector in LAC: Current Status and Evolving Issues," LAT Regional Studies Report No. 35, The World Bank, June 1995. Pursuit of Sustainable Energy Development in the Americas 13 ground for sharing experiences and building upon the better examples among the hemispheric countries through information exchanges and cooperation on regulatory and institutional issues. III. Promoting Energy Efficiency in the Americas As a practical issue, optimizing rational use of energy and other resources is considered one of the least-cost means of enhancing economic competitiveness of goods in an increasingly global marketplace. Energy efficiency applications often are self-financing and promote technological upgrades and greater skill development. Although tremendous achievements in energy efficiency have occurred in the United States, Canada, and other industrialized nations, the developing countries generally suffer in this regard due to technological obsolescence, poorly configured and underutilized systems, poor maintenance of existing energy and production systems, and low levels of investment in efficiency programs. This situation prevents significant energy savings and overall cost reductions in all productive sectors of the economy as well as at the residential consumption level. It also affects the trade account and overall macroeconomic conditions for energy-importing nations. The Latin American Energy Organization (OLADE) has estimated that energy efficiency measures could result in annual savings equivalent to 40 percent of total energy imports in Latin America and the Caribbean.12 Energy efficiency is one of the lowest-cost measures (or no-cost, as they usually pay for themselves through energy savings) that helps both industrialized and developing countries to manage sustainable environmental quality while meeting the needs of economic growth to increase the overall supply of energy. However, energy producers and users commonly share the lack of motivation to make the up-front capital investments in energy efficiency measures, even though they can anticipate direct economic benefits. Often, this is because centrally supplied energy costs are subsidized, or because the cost of borrowing is high, or the investment provides a relatively low return on capital. In some cases, the industry has been protected from competition and thus has not been pressured to reduce operating or production costs. In addition, even the most minor changes involve time and labor costs related to the effort to evaluate and/or implement options, and many potential participants are reluctant to undertake the effort. Therefore, national and local governments may need to play a catalytic role to launch energy efficiency initiatives by providing the right signals to energy producers and consumers. These signals may include: * appropriate energy pricing that accounts for all economic costs of energy supply; * taxation policies; and * energy equipment/appliance standards in all sectors. 12. "The Regional Response to the Greenhouse Issue: Latin America and the Caribbean," by Francisco J. Gutierrez, OLADE, for the UNEP "Conference on National Action to Mitigate Global Climate Change," Denmark, 1994. 14 LA T Regional Studies Program Report No. 42 In addition, energy efficiency can be promoted at the local, national, or regional level through: * consumer information and assistance programs, provided by utilities and designated agencies; * financing programs and information; * research and development programs; * formulation of assessment techniques; and * educational and training programs. A. Technical Applications and Technology Issues: Advances in Energy Efficiency 1. Technologies Major strides have been made in the past few years that improve the efficiency and applicability and lower the costs of many technologies in industrial, agricultural, commercial and residential applications. These advances are apparent in the more efficient boilers and other combustion systems, drives, engines, heat exchangers, pollution control equipment and emissions monitoring systems, conductive and insulation materials, and controls and instrumentation used in utility and industrial energy production and delivery systems (including Supervisory Control and Data Acquisition systems). In industrial, agricultural, commercial, and residential applications, improved chillers, pumps, lighting, heating/cooling/air conditioning and energy storage systems, insulation, fuel systems, instrumentation and controls (including end-user meters and thermostats), and better building efficiency (materials and design) can also contribute to considerable cost-effective energy savings and fuel efficiency.13 Upgrades in boilers and boiler controls offer a considerable improvement in energy efficiency, but would be most effective in the context of a comprehensive evaluation of the entire energy system. Achievements in greater process efficiency and waste minimization programs in industrial activities usually yield considerable gains in energy efficiency, as do more advanced techniques in operations and maintenance programs (for industrial processes, transportation vehicles, appliances, and heating/cooling/air conditioning systems) and the use of cogeneration systems to meet thermal and electricity requirements. The use of cogeneration applications-one of the energy efficiency options-results not only in greater efficiency in producing both types of energy than would occur through the separate production for each type of energy, but also in lowered amounts of overall emissions per unit of energy produced. Cogeneration using gas as a fuel is increasingly popular in industrial applications, as is the substitution of local biomass resources for petroleum-based fuels. Cogeneration often enables the host industry-often major energy consumers-to be self- 13. Data on the percentage of energy saved for each efficiency technique applied varies on the particular features of the systems, equipment, process, and quality of materials. A rough summary of the potential derived from various reports on industrial energy savings (U.S. Office of Technology Assessment, The World Bank, U.S. Trade and Development Agency) in different countries indicates that maintenance, repair of leaks, (boiler, piping) insulation and other low-cost measures with paybacks of less than a year can produce energy savings of up to 40 percent, in addition to side benefits to production efficiency. Pursuit of Sustainable Energy Development in the Americas 15 sufficient in energy and sell excess power to the local grid by significantly increasing productivity through basic modifications to the process plant and careful selection of the technology and configuration of the system. 2. Techniques Even without new technology options there is considerable potential for energy efficiency and energy savings through demand-side management (DSM) programs. Energy efficiency gains through DSM are largely achieved through educational programs on simple cost-effective housekeeping measures. These measures may offer significant energy savings at all levels of consumption and may include repairs of leaky valves and washers, caulking, strategic landscape shading (for coolness), optimal placement or configuration of energy heating or cooling equipment, pipe insulation, lighting schemes (such as the use of lower wattage and compact fluorescent lighting), load management techniques, time-of-use or seasonal schedules, and the proper use of temperature control devices. Time-of-use and seasonal tariff schedules can be very effective for reducing peak loads if the consumers receive the correct information on such programs and have the technical knowledge or access to advice on how to change their operating schedule or otherwise manage their peak load requirements. Instruction on how to reduce energy bills through simple fixes or strategies can be provided to targeted consumer groups and is relatively cheap. Key targets for instruction should go beyond existing energy consumers to include building designers and construction companies involved in new housing or commercial/industrial building activities.14 In some cases, especially when energy supply is already constrained, it may be necessary and appropriate for incentives-for example, incremental block pricing or possibly (supplier-consumer) shared cost-savings or prizes-to be provided to consumers to encourage energy-saving practices until they become culturally entrenched. Typically, distributors/utilities craft the DSM programs according to their actual or anticipated supply constraints or load curves and aim at peak load (electricity) or general demand (oil or gas suppliers) reduction to delay shortages and/or investment in new capacity. The utilities interface directly with customers and provide literature, launch advertising campaigns, and design appropriate incentives targeting specific groups and objectives. The introduction of energy efficiency standards for appliances on a voluntary or mandatory basis offers another means of achieving widespread savings in energy consumption. Such programs are adopted at the national level and closely involve domestic and even foreign appliance manufacturers, who not only will produce the more efficient devices but will need to cooperate by providing the necessary information on how to evaluate the energy saving 14. According to Ted K. Bradshaw of the University of California-Berkeley's Institute of Urban and Regional Development, "It may be possible to produce and market houses that are so well designed and insulated that they require near-zero power for space conditioning during peak demand periods ... and that building a zero- energy house would cost the same as or less than building a regular house." California Institute for Energy Efficiency website, Project Highlights, "Potential for Zero-Peak-Power Housing in California," June 1996. 16 LA T Regional Studies Program Report No. 42 features and potential cost-savings to retailers and to consumers for decisionmaking purposes at the time of purchase. Other likely participants in these programs are government implementing agencies, technical laboratories, and consumer (and possibly environmental) associations or advocacy groups. In general terms, the considered application of the above-listed technologies and practices in appropriate settings will yield energy and cost savings as well as reduced waste streams and polluting emissions. Less fuel will be required to yield more of the product, whether it is electricity or a manufactured or other good. Other benefits may include quieter, cleaner, healthier indoor settings, improved health and well-being of individuals, reduced energy loads, fewer shortages (blackouts or brownouts), reduced water consumption, reduced requirements for other inputs, and the freeing of financial and other resources for other uses. The payback period of these measures varies from a few months to approximately seven years. Reports for the World Energy Council estimate that rigorous energy efficiency programs for transportation vehicles, appliances, and buildings could reduce the annual growth rate for energy consumption in the building sector (globally) from 2.4 percent to only 1.0 percent, and bring the annual growth rate of energy consumption in the industrial and transportation sectors down to virtually zero (as opposed to 1.4 percent and 1.9 percent, respectively) while maintaining the same level of economic growth.'5 It is estimated that an investment of 0.7 percent of gross domestic product in Venezuela for energy efficiency programs would reduce total energy consumption by 1.0 percent, increase aggregate production by 2.5 percent, raise employment levels by 0.6 percent, lower the aggregate price index by 0.1 percent, and reduce carbon dioxide (C02) emissions by 2.3 percent. Similarly, an investment of up to $20 billion (all dollar amounts are U.S. dollars) in Brazilian energy efficiency initiatives could reduce demand growth for electricity by 50 percent-to 2.5 percent annually-thereby saving about $50 billion in supply capacity investments over a period of eiPhteen years (presuming that the funds to invest in so much new capacity would even be available). If sustained, these benefits would increase exponentially over a period of years. An estimated 66 gigawatts (GW) of new power capacity are required to support anticipated economic growth over the next decade in Latin America and the Caribbean, representing an investment of around $200 billion. Energy efficiency measures could reduce that projected demand by about 20 percent. 3. Energy Efficiency Programs in the Americas Brazil. The national electricity conservation program, the Programa de Conservagio de Eletricidade (PROCEL), was initiated in December 1985 as the first systematic effort to rationalize the use of energy in Brazil. PROCEL has five (originally it had six) major program 15. "Energy Efficiency Strategies," White Paper prepared for the U.S. Department of Energy, for the Hemispheric Energy Summit, October 29-31, 1995, cites Levine 1995, and World Energy Council 1994. However, the cost of following this particular approach was not made clear. 16. lbid, cites H. Geller 1991. Pursuit of Sustainable Energy Development in the Americas 17 areas, largely carried out by the utilities and research institutes and laboratories, which target across-the-board supply-side and demand-side management measures for major industrial and commercial consumers and for public lighting. The programs encompass: energy audits that provide recommendations for improved maintenance, efficient lighting systems, replacement of oversize motors, and improvements in energy delivery systems; appliance labeling; replacement of incandescent bulbs with mercury vapor lamps or efficient, high-pressure sodium lamps in public lighting applications; educational programs including technical manuals, seminars, and promotional literature; and research and technology development projects. Over the 1986-94 period it is estimated that the $35 million invested in these measures achieved savings equivalent to 250 MW of capacity, or an avoided investment cost of $375 million. In other terms, the social cost of savings from the program is estimated at $20/MWh as compared with estimated costs of $60/MWh for system expansion. Appliance labeling is seen as producing the best results; in 1992 alone, energy savings from refrigerators and freezers were estimated at 390 GWh, and total energy savings from appliances were 1,150 GWh. Meanwhile, energy audits produced annual savings in the range of 65 GWh to 100 GWh. The program planned to invest $25 million in 1995 to achieve energy savings of around 900 MWh and thus avoid $360 million in investments for additional power capacity.'7 In the hydrocarbons sector, the Brazilian national oil company, Petrobris, was placed in charge of a national program for the rational use of oil and natural gas products (Programa Nacional para o Uso Racional de Derivados de Petr6leo, or CONPET) established in July 1991. Five key programs are set up in the transportation sector to reduce emissions and unit consumption and to shift the transport mix to waterways and pipelines. Targeting primary areas of oil and gas consumption, CONPET has been working with energy-intensive industries and consumers in general to promote more efficient energy use through various incentive (including financial) and information programs. CONPET encourages commercial and residential consumers to switch from liquefied petroleum gas to natural gas, and agricultural consumers to reduce diesel consumption. In the electric power sector, CONPET promotes the use of more efficient combined-cycle generation based on nondiesel fuels. CONPET has also undertaken the development and commercialization of energy efficient technologies and promoted technical norms for energy production and use of hydrocarbons. In addition, it is active in identifying regional solutions for energy problems and working with other energy conservation organizations around the country. The United States. A few years after the initial oil shock in the 1970s, the U.S. Congress passed numerous laws promoting energy conservation and energy efficiency, restricting fuel use, and promoting the development and commercialization of alternative and renewable energy forms. These include the Powerplant and Industrial Fuel Use Act, and the Public Utility Regulatory Policy Act, among others. The Public Utility Regulatory Policy Act aimed at promoting energy conservation through cogeneration with minimal thermal efficiency standards and featuring required utility purchases of electricity generated by "qualifying 17. "Energy Conservation in Brazil," M.J. Marques, J.B. de Hollanda, M.T. Tolmasquim. Technical Papers, World Energy Council, Brazilian Committee, WEC 16th Congress, Tokyo, Japan, October 8-13, 1995. 18 LA T Regional Studies Program Report No. 42 facilities" (nonutility generators that met the requirements set by the Federal Energy Regulatory Commission) at the utility's avoided cost. Major initiatives launched by industrial consumer organizations, utilities, building associations, local government agencies, and energy-related NGOs resulted in notable improvements in efficiency implemented through modernized industrial cogeneration systems, upgraded equipment and systems (for example, electric arc furnaces), and through numerous DSM programs that targeted commercial, industrial, and federal building lighting and air conditioning systems, improved controls and meters, and insulation programs. Utilities also employed time-of-use rates or seasonal tariff mechanisms to encourage more rational energy use and conservation. At the residential level, the primary targets of energy conservation efforts were improved appliance efficiency standards and appliance replacement, insulation measures, and consumer education programs. According to the U.S. Energy Information Administration, current energy consumption in the United States is estimated to be roughly three-fourths of what it would have been without these programs. Mexico. Mexico's energy efficiency program directed by the Fideicomiso de Apoyo al Programa de Ahorro de Energia del Sector E16ctrico claims that electricity consumption is 5 percent less than projected over the five-year period it has been active. The 5,400 GWh in savings were attributed to end-user demonstration programs in the industrial, commercial, agricultural, residential, and public service sectors. The technologies in the program ranged from irrigation water pumps and compact fluorescent lighting to residential insulation. In addition, an estimated 420 million tons of emissions of nitrogen oxide (NOx), sulfur dioxide (SO2), carbon dioxide (C02), and particulates were avoided. Jamaica. Supported in part by the Global Environmental Facility, UN Development Programme (UNDP), UN Environment Programme (UNEP), Inter-American Development Bank (IDB), Canadian Trust Facility, and the Rockefeller Foundation, the Ministry of Public Utilities and Transport in Jamaica initiated a demand-side energy efficiency demonstration project for the commercial and residential sectors in conjunction with the national utility, Jamaica Public Service Company, in 1994. The five-year program is expected to cost $12.5 million over its duration and result in lower electricity bills for consumers and a lower level of energy usage and demand on a national level.'8 Chile. Chile launched a study of six industries that account for about 50 percent of the country's total electricity consumption to identify their energy savings potential. The findings estimated that the industries could reduce their energy consumption by about 28 percent, or 2,600 GWh (10 percent of national consumption), while recovering 20 percent of their efficiency investment in the first year.19 18. "A Hemispheric Commitment to Energy Efficiency," a Discussion White Paper prepared for the U.S. Department of Energy for the Energy Efficiency Strategies session of the "Hemispheric Energy Symposium," Washington, DC, October 29-31, 1995. 19. Ibid. Pursuit of Sustainable Energy Development in the Americas 19 IV. Renewable Energy: Options for Growth A. Recent Evolution in Renewable Energy Applications Previously the potential of renewable energy technologies-like other energy technologies- was linked to oil prices; now it is more closely tied to environmental issues. This linkage is founded on three key events: the release of the "Brundtland Report" prepared by the World Commission on Environment and Development in 1987, which dealt with energy-related ecological and developmental issues and proposed the use of renewable energy technologies to help preserve the environment and contribute to development needs; the United Nations Conference on Environment and Development (UNCED) held in Rio de Janeiro in June 1992, at which "Agenda 21'"-a major document on environment and development that aimed to launch an action plan for "operationalizing" sustainable development-was reviewed by one of the largest gatherings of heads of states and endorsed by several multinational entities as well; and the UN Framework Convention on Climate Change (FCCC), a treaty signed at UNCED 1992 by 154 nations. As outlined in Agenda 21 and the FCCC, renewable energy forms have a key role to play in substituting for fossils fuels and helping to mitigate and reduce the energy sector's contribution of an estimated 50 percent of total greenhouse gas emissions. The main obstacles to greater deployment of renewable energy technologies are: * institutional deficiencies; * pricing distortions; and * limited information on renewable energy resource base. To overcome these obstacles, the focus of renewable energy strategies should be to: * plan for long-term energy needs; * develop and implement strategies to leapfrog current technologies and institutional capabilities; * initiate long-term renewable energy training and institutional capacity building; * institute new, flexible financing mechanisms; and * emphasize broader use of creative dissemination strategies. 20. The signing of the FCCC marked a shift by developing countries on global climate change issues, as their main concern was, and still remains, providing basic energy services to a majority of their population. Since then, concern for global environmental effects has bloomed in developing countries, especially for predominantly agricultural economies that are seen as being at risk if the anticipated weather changes occur. This concern is less apparent, however, in oil-exporting nations whose short- and medium-term interests are to ensure optimal income from their oil exports. "Renewable Energy Technologies as an Option for a Low- Carbon Energy Future for Developing Countries: Case Examples from Eastern and Southern Africa." Stephen Karekezi, for the UNEP "Conference on National Action to Mitigate Global Climate Change," Denmark, 1994. 20 LA T Regional Studies Program Report No. 42 B. Advances and Applications As with energy efficiency, the use of state-of-the-art renewable energy technologies- including solar thermal, photovoltaic, wind power, geothermal, and biomass energy (cogeneration) systems-has the potential to provide a considerable amount of new energy supply capacity, especially electricity, in developing countries. Although renewable energy also entails environmental impacts, these are generally considered to be less directly damaging than those incurred through the use of traditional, exhaustible fuel sources and thus their increased application may help reduce overall environmental degradation caused by energy production. This potential is important in countries where growing energy demand is largely not met, but emissions of S02, NOx, CO, CO2, lead, ash, and other particulates cause significant local air pollution problems, especially in major urban centers.21 The capital costs of most renewable energy technologies have decreased in the past few years. Some have become competitive with traditional energy sources in the marketplace on an energy production unit cost basis ($/kWh). In some areas where the cost of centrally supplying modem energy fuels (mainly oil, gas, other hydrocarbon derivatives, and electricity) is prohibitive, isolated electricity and thermal energy systems based on local renewable energy sources are the most rational way to supply energy to support the economic development of "marginalized" communities and agricultural interests in a sustainable manner. Furthermore, except for,biomass, renewable energy projects help avoid greenhouse gas and other detrimental emissions (CO2, S02, and NOx) that characterize the combustion of traditional fossil fuels. This may be particularly relevant in seeking alternative energy options to small, isolated diesel generators, which are often deployed (but as often are seen as prohibitively expensive) in many of the more remote regions.22 Because of the number of potential applications in rural settings alone, the offset of emissions achievable through the expanded use of renewable energy projects is calculated to be large. To illustrate, examples of current renewable energy technologies are described below. Wind machines (wind pumps and wind generators) are used for water pumping or for electricity generation. For the latter, a higher mean annual wind speed is required. To determine the options, an assessment of mean annual wind speed in different areas must be undertaken.23 Wind turbine capacity and efficiency has experienced tremendous improvements, with turbine capacity now in the 600 kW range compared with ten years ago when it was 75 kW, and reliability now at around 99 percent. Consequently, the costs of electricity generated by wind turbines is now as much as 50 percent cheaper than it 21. For example, many urban centers in Latin America and the Caribbean experience major problems from this kind of pollution, even though the entire region only contributes about 5 percent of total global emissions of CO2. 22. Small diesel sets in remote areas also tend to be subject to unreliable fuel supply, as well as being expensive. 23. "Renewable Energy Technologies as an Option for a Low-Carbon Energy Future for Developing Countries: Case Examples from Eastern and Southern Africa." Stephen Karekezi, for the UNEP "Conference on National Action to Mitigate Global Climate Change," Denmark, 1994. Pursuit of Sustainable Energy Development in the Americas 21 was in 1990. Evidence of this technology's increased competitiveness in developing nations is seen in India, where 500 MW of wind power came on line in 1995, as well as in industrialized countries such as the United States, Denmark, and Germany. In fact, the European Union (EU) has set a target of producing 8 percent of its primary energy requirements from renewable energy sources by 2005, with wind expected to contribute 2 percent of the EU's collective electricity demand by that year.24 Some EU countries will have levels well above that target. * Solar thermal technologies most commonly used in developing countries are solar water heaters, solar cookers, solar stills, and solar dryers. Recent improvements in efficiency and reduced cost of solar water heaters results in a payback period of three to five years for small water heaters (based on those deployed in Zimbabwe and Botswana). The availability of liquefied petroleum gas in more developed countries renders solar water heaters uncompetitive. Also solar dryers or kilns (used more commonly to dry agricultural products) are showing better results than traditional open-sun drying because they reduce product losses due to deterioration and insect infestation. However, these are generally too expensive for small-scale farmers and only middle-size farmers can afford to purchase them.25 * Solar photovoltaic technology is expected to have a production cost of around $2/peak watt (Wp) by the year 2000, which reflects a continuing decline in cost over the past twenty years or so as increasing numbers of modules (representing 48 MWp in 1990) were produced on a global scale. Deployment of solar photovoltaic technology in the appropriate rural areas can meeting lighting and refrigeration needs for rural households and institutions.26 Solar power has incorporated the potential for storing energy and thus allows electricity production even at night using a new molten salt (central receiver) technology. The $48.5 million, 10-MWe Solar Two demonstration project in California's Mojave Desert is providing enough power for 10,000 homes during its testing program, which runs through 1998.27 In the immediate term, solar photovoltaic programs in developing countries are focused on remote rural households beyond the reach of viable grid extensions. Typically, such installations consist of a solar panel (50 Wp), a regulator, battery (100 ampere-hours), three light points, and an electrical outlet for a radio or television. As a possible implementation approach, energy service companies would install and maintain the 24. "This Happy Breeze," by Geoff Nairn, Financial Times, July 17, 1996. 25. "Renewable Energy Technologies as an Option for a Low-Carbon Energy Future for Developing Countries: Case Examples from Eastern and Southern Africa." Stephen Karekezi, for the UNEP "Conference on National Action to Mitigate Global Climate Change," Denmark, 1994. 26. Ibid. 27. "O'Leary turns on sun's power at solar plant," DOE This Month, July 1996, page 5. 22 LA T Regional Studies Program Report No. 42 panel and regulator in return for a monthly fee while the consumer would purchase the battery, lights, outlet, cables, and accessories. * Small-scale hydro (including micro, mini, and small) systems are suitable for remote areas with dispersed populations and where conventional fossil fuels are not readily available at a reasonable cost. These use run-of-the-river type technology and are often economically deployable where rivers or the terrain cannot economically or environmentally accommodate larger hydroelectric installations or associated facilities. There are often industrial entities-for example, mining firms or pulp and paper mills-which may have an interest in developing production facilities in particular isolated regions where the development of small hydro sites is feasible. These companies are possible candidates to operate the power installations and manage the small local distribution systems (50 kilometers to 150 kilometers) that would be built to supply electricity locally. * Large hydro resources are a key energy source with a large potential role in the sustainable development process of many countries in Latin America and other regions. Some large hydro projects may be relevant in specific rural energy programs, even if the bulk of the energy produced is relayed to distant urban centers. * Geothermal: Although limited to specific geographic areas, commercial geothermal electricity production is well-established in the United States, Mexico, and in other regions of the world. Several Central American countries (such as El Salvador, Honduras, and Nicaragua) have notable geothermal potential and are proceeding with geothermal projects. Brazil and other countries in the hemisphere also have commercial geothermal energy potential. Geothermal technology has recently undergone notable improvements in drilling, turbine technology, and piping systems. It is most efficient when it can be used to cogenerate electricity and provide hot water or steam. Geothermal is very clean and very effective in augmenting energy supply options. * Biomass: Forest and crop residues (such as rice hulls, corn husks, and bagasse), wood chips, and other forms of natural waste are typically available in all but the most harsh terrain. Most countries in Latin America and the Caribbean produce sugar cane, for example, and therefore bagasse is a prominent fuel option.28 The widespread availability of potential biomass fuels enhances the range of energy options for remote and isolated populations. 28. In Brazil's sugar and alcohol industry alone, the potential for bagasse-fired cogeneration systems was estimated to be as much as 7,700 MW. Source: Report to USAID, 1992, "Global Climate Change Mitigation through Cogeneration: A Market Assessment of Cogeneration Project Opportunities in Key Developing Countries," by Advanced Engineering Associates and Washington International Energy Group. Pursuit of Sustainable Energy Development in the Americas 23 Although biomass energy is sometimes considered not to be neutral in terms of its long-term impact on greenhouse gas emissions, biomass energy plantations in rural or urban communities are considered to be an effective option for reducing carbon emissions and other forms of environmental degradation associated with decentralized biomass energy use.29 This is because such plantations provide carbon sinks, reduce the time and labor allocated to collecting fuelwood or other biomass forms for home use, create jobs, produce other crops (corn, rice, sugar, fodder, construction materials, medicines, etc.), assist resource management, help restore degraded land, reduce soil erosion, and fuel energy production plants with less overall emissions and other environmental impacts. Biomass consumption has grown rapidly in Latin America and the Caribbean, accounting for 19 percent of primary energy consumption in 1992. This growth is mostly due to greater industrial consumption rather than to household use. Moreover, it should be noted that, despite the trend, only 15 percent of deforestation in the region is attributed to biomass energy consumption.31 Biomass-to-electricity systems in the near to medium term are expected to evolve toward integrated gasifier/gas turbine (single or combined) cycle technology. They offer lower capital requirements (about $1,300/kW installed) and energy costs (about $0.05/kWh) than conventional coal or coal gasification power plants and will be more efficient. Careful assessment of the quantity of available biomass fuels in a given area and of the requirements to gather, transport, store, and utilize them in efficient energy systems (such as combined-cycle cogeneration) will provide the basis for crafting effective and environmentally sound energy supply options contributing to the sustainable development of innumerable communities. Table 2 gives a general comparison of the (average) unit generating cost, capital cost per installed unit of capacity, and amortization period for established renewable energy technologies and for a gas turbine unit. All energy projects, including renewable energy projects, require careful consideration of externalities. Although several renewable energy technologies are considered to be commercially ready, their market penetration has been held up due to considerable transaction costs or their newness to financing institutions and investors, which result in a less financially attractive 29. It should be noted that biomass-fired energy systems produce CO2 emissions, although biomass fuels only release the amount of carbon they have absorbed during the feedstock plant's growth and replanted crops preserve the carbon absorption ("sink") function. Depending on the combustion system used, biomass fuel emissions of NOx are minimal, if any, and there are no emissions of SO2. Consideration should also be given to the availability of land and its alternative uses. 30. "Biomass Energy Development and Carbon Dioxide Mitigation Options," D.O. Hall and J.I. House, for the UNEP "Conference on National Action to Mitigate Global Climate Change," Denmark, June 7-9, 1994. 31. Growing deforestation trends in LAC are primarily caused by migratory and commercial agriculture, livestock raising, and infrastructure projects. "The Regional Response to the Greenhouse Issue: Latin America and the Caribbean," by Francisco J. Gutierrez, OLADE, for the UNEP "Conference on National Action to Mitigate Global Climate Change," Denmark, June 7-9, 1994. Cites World Bank study. 24 LA T Regional Studies Program Report No. 42 Table 2. Comparative Cost Features Cost/kWh Cost/kW installeda Amortization System Type ($) ($) periodb (years) Solar Photovoltaic Solar Home Systemsc 1.30d 12,000 (600/Wp) 3-10 Utility-scale 0.16 or 0.09e 4,000 10-15 Wind Small (1-100 kW) 0.10-0.50 1,500-5,000 7-12 Utility-scale 0.06-0.08 900-1,200 15 Small-scale Hydro (100 kW) 0.10 2,500 5-10 Biomass Bagasse cogeneration (1-20 MW) 0.05-0.10 500-2,500 7-15 Small Wood Gasifier (5 kW) 0.15-0.30 300-800 7-15 Gas turbine 0.04-0.05f 250-300 5-7 Source: The World Bank, IEN, August 1996 a. It must be noted that the cost of these systems varies considerably according to location, size, and other factors affecting the actual application. b. Amortization periods vary, so these are only a rough indication. c. Based on modules providing about five hours of daily lighting capacity per home. d. Due to the current high cost of solar photovoltaic, grid-connected applications are still considered experimental and are limited to grid-support and peaking power operation. Decentralized, off-grid solar home systems may be the most practical application for basic needs in rural or isolated areas. e. "Indian delegation seeks the sun," DOE This Month, July 1996, page 5. Price proposed for solar- generated electricity that the Rajasthan Electric Utility (India) would pay Bechtel/Rockwell as the future project's owner. f. Based on a fuel cost of $3 per million British thermal units. profile. These are partly caused by a lack of institutional capacity at both the national and local levels and of financing mechanisms that can deal with the specific set of issues that renewable energy utilization entails. Yet the deployment of renewable energy technologies is expected to play a significant role in rural electrification schemes. For example, in 1994 the government of Bolivia, with electricity service covering 54 percent of the country but only 16 percent of rural households, set a goal of 78 percent electricity service coverage nationwide by 2006. Consequently, the government is preparing a program for rural electrification (with the assistance of the joint UNDP/World Bank Energy Sector Management Assistance Programme, or ESMAP) that is expected to encompass the electrification of 250,000 rural households per year over a five-year period.32 Small-scale hydro and solar photovoltaic projects are likely to provide a key means of attaining this target. Local governments and civil society have a key role to play in identifying the resources, energy needs, and type of cooperative programs that are most suitable for rural energy programs in specific areas. 32. According to World Bank data as of July 1996, about 40 percent of Bolivia's population currently lives in rural areas. Pursuit of Sustainable Energy Development in the Americas 25 In summary, renewable energy resources are generally better distributed than fossil fuel reserves. They are considered part of the long-term strategy that will help to substitute gradually for finite resources in industrialized, emerging, and developing nations. Because of their long-term nature, they are less threatening to oil-exporting countries (unlike energy efficiency, which would soon begin to have an impact on oil and gas consumption). Renewable energy technology deployment is expected to provide benefits such as increased and diversified electricity production, job and skill creation, greater income generation, and reduced wastestreams and environmental degradation.33 C. Priorities with Significant Impacts on Sustainable Development The key to promotion of renewables is the dissemination of information on the available technologies and their applications, building institutional capacity, and linking various supportive programs. Dissemination of renewable energy information can be routed to target areas via existing networks used by marketing, production, and supply programs in other sectors. In addition, information can be disseminated with the direct involvement of technology vendors and local participating enterprises. This approach might have better results because those who will earn income from increased utilization of renewable energy technologies will be likely to aggressively pursue at least the most promising targets. This may require some guidance from governments or other interests to make sure that areas with less attractive income generation prospects for these interests are not left out of the information loop or notably delayed in receiving information that has immediate utility. Local technical, economic, and administrative skills that specifically relate to and support the development of renewable energy, especially in areas which were not previously electrified, need to be fostered. These skills will more efficiently enable evaluation of local resource potential, operation and maintenance of renewable energy systems, management of commercial and financial functions, and administration of billing, customer service, and other relevant activities that may include public policy and public administration roles for the local government.34 Where possible, leapfrogging technological and institutional constraints could help to stimulate the optimal implementation of renewable energy programs. Support of new technologies rather than conventional energy technologies by multilateral and bilateral aid and funding agencies will help optimize progress in sustainable development by avoiding the use of technology that no longer has a market in industrialized countries. In developing renewable energy strategies, it is important to recognize the evolving paradigm of an energy sector increasingly based on private sector generation and decentralized energy supply systems.35 33. "Renewable Energy Technologies as an Option for a Low-Carbon Energy Future for Developing Countries: Case Examples from Eastern and Southern Africa." Stephen Karekezi, for the UNEP "Conference on National Action to Mitigate Global Climate Change," Denmark, 1994. 34. Ibid. 35. Ibid. 26 LAT Regional Studies Program Report No. 42 In summary, the following are low-cost, relatively simple approaches to promote renewable energy projects. It is also suggested that on a national or regional level, an inventory of exploitable renewable energy resources be catalogued. These will then be able to be assessed more readily within an integrated resource plan that will indicate the priority projects. * Provide targeted and general information, technical assistance, and possibly financing mechanisms to help jump start small-scale projects in rural areas. * Enhance use of integrated resource planning at a national and regional level to show where small, renewable energy projects have a comparative advantage. * Give greater emphasis to the role of renewable biomass and alternative energy sources for local use and socioeconomic development, decreased CO2 and other emissions, and contributions to national economic growth. Private investors may need to be persuaded that the government is committed to wider deployment of these energy forms; special funds for lending seed money at favorable terms or providing assistance in identifying likely sites for such projects with a clearly established market for energy sales from these plants may facilitate the launching of such programs on a national scale. * Ensure that national policies on foreign investment and trade do not inhibit the import of technology components or systems that are vital to renewable energy projects. With the technological costs of installations on the high side, onerous import duties or tariffs on renewable energy project components could easily overwhelm the project. Renewable projects in particular may already face higher risks than other energy projects because most of the installations are in remote locations, they rely to some extent on climatic conditions, and they involve providing service to a small customer base that may not be familiar with energy services, safety guidelines, the billing system, and their payment responsibilities. V. Other International Activities Supporting Hemispheric Progress Toward Sustainable Energy Development A. Addressing Global Environmental Issues Through Actions and Strategies on the Energy Front The international programs relevant to energy and sustainable development that are on the same track as those being pursued in the western hemisphere are primarily related to the issue of global climate change (GCC). GCC is perceived as occurring at an accelerated pace due to anthropogenic activities, especially those which result in greenhouse gases-such as carbon dioxide, methane, chlorofluorocarbons, and ozone-that destroy the ozone layer or otherwise Pursuit of Sustainable Energy Development in the Americas 27 affect the absorption or redistribution of radiative energy in the Earth's atmosphere.36 The GCC phenomenon has been the focus of considerable and growing concern over the past two decades, and several specific scientific panels, organizations, and conventions have been created to deal with the various issues encompassed by it. CO2 emissions account for roughly 50 percent of global GHG emissions. CO2 is released primarily through three anthropogenic sources: energy production and use (which is responsible for 70 percent of CO2 emissions), industrial activities, and land use changes. Although they have only 25 percent of the world's population, the industrialized countries have so far contributed 75 percent of total GHG emissions. The emission of GHGs per capita in North America is five times the world average, and in Western Europe it is twice the world average. In contrast, the average GHG emissions per unit of GNP in the United States and other developed countries are among the lowest in the world, while developing countries have far higher levels because of poorer efficiency. Moreover, because of this lower efficiency it is likely that economic growth in developing countries will cause rapid increases in CO2 emissions in the future.37 While in the United States increased energy consumption is the principal source of higher CO2 emissions, in Latin America and the Caribbean about two-thirds of the increase in overall CO2 emissions is caused by deforestation.38 Existing and potential energy supply in Latin American countries with growing consumption trends is largely dependent on huge hydroelectric resources,39 and on natural gas as both a direct fuel and for turbine-based generation. Oil's share in the total primary energy for the region has been reduced from 63 percent in 1970 to 51 percent in 1992, largely due to increased hydropower production.40 Natural gas consumption in the hemisphere is rising both in the gas-producing countries-Canada, the United States, Mexico, Venezuela, Argentina, and others-and in the gas-importing countries. 36. The interrelationship of the climate system and various human and natural activities is still not well understood. The Intergovernmental Panel on Climate Change's assessments (first performed in 1990) are largely accepted as the most authoritative source for understanding the GCC phenomenon. For a summary on the state of the science of GCC and the ongoing studies related to the impact of GHG emissions on GCC, see "An Overview of International Actions to Deal with the Climate Change Problem and the Scientific Update," Peter Usher, Climate Unit, UNEP (Nairobi), for the UNEP "Conference on National Action to Mitigate Global Climate Change," Denmark, June 7-9, 1994. 37. "Strategies to Mitigate Climate Change in a Sustainable Development Framework," Ogunlade R. Davidson, for the UNEP "Conference on National Action to Mitigate Global Climate Change," Denmark, June 7-9, 1994. 38. "The Regional Response to the Greenhouse Issue: Latin America and the Caribbean," by Francisco J. Gutierrez, OLADE, for the UNEP "Conference on National Action to Mitigate Global Climate Change," Denmark, 1994. An estimated 4 million to 6 million hectares of forests in Latin America and the Caribbean are destroyed annually. 39. Ibid. Hydropower represented 60 percent of total generating capacity for the region, but in 1992 this was only 13 percent of the region's hydropower potential. Its development has had increasing financing and environmental difficulties (resettlement, ecological damage including deforestation) over past decade or so, with subsequent emphasis given to oil- and gas-fired projects with lower capital requirements and less risks. One line of reasoning proposes that hydro and biomass energy projects may cause an overall increase in CO2 emissions by destroying carbon sinks. 40. Ibid. 28 LAT Regional Studies Program Report No. 42 1. Similar Programs Sponsored Under Other International Fora (UN, IPCC) * The United Nations Conference on Environment and Development (UNCED 1992, or the Rio Summit) was a watershed event for environmental issues. It was one of the largest gatherings of heads of state ever and adopted a concrete plan, outlined in Agenda 21, based on voluntary actions by individual governments. It also produced the Framework Convention on Climate Change (FCCC). The FCCC was adopted by the Intergovernmental Negotiating Committee on May 9, 1992 and signed by 154 countries and the European Union at UNCED in June 1992. The FCCC called for concrete voluntary plans of action for stabilizing greenhouse gas emissions to be decided on and implemented through international cooperation. Among the commitments made by the signatories to the treaty was that of promoting and cooperating "in the development, application, and diffusion of technologies and processes that will reduce the emissions of greenhouse gases and conserve/enhance the sinks of greenhouse gases."4 At the national level, it is expected that governments will adopt regulation of emissions and energy efficiency measures for supply- and demand-side activities to meet this goal. The "no regrets" policy that was also adopted at UNCED 1992 encourages governments to take actions which will benefit them in other ways as well as helping to achieve greenhouse gas emission reduction targets. These may include energy efficiency improvement measures such as the application of stricter appliance efficiency standards. * The Intergovernmental Panel on Climate Change (IPCC) was established by the World Meteorological Organization and the UNEP in 1988. Working Group III is one of the IPCC's three core groups and is assigned to formulate possible response strategies to climate change phenomena. Its first report on this topic was presented in 1990. This work was updated for UNCED 1992. Working Group III was directed in November 1992 to incorporate economic and other issues into its response strategies. * International Conference on National Action to Mitigate Global Climate Change. The UNEP formed a partnership and sponsored a conference with the Danish Riso National Laboratory to monitor and exchange information on progress made in mitigating GHG emissions by individual nations. Periodically, formal presentations and views are aired and the information is further disseminated to provide learning tools and guidance to other interested parties. The areas of information include 41. "An Overview of International Actions to Deal with the Climate Change Problem and the Scientific Update," Peter Usher, UNEP, for the UNEP "Conference on National Action to Mitigate Global Climate Change," Denmark, 1994. Pursuit of Sustainable Energy Development in the Americas 29 scientific, technological, technical, policy, and regulatory programs and activities, including those undertaken at the international, regional, and national levels. United Nations Environment Programme (UNEP). In addition, the UNEP is undertaking support of an international standard methodology that will be used to develop national inventories of sources of and sinks for greenhouse gases. The UNEP is also sponsoring a project to formulate a methodology to perform national greenhouse gas emissions abatement costing studies. These may serve as a useful platform to jointly perform inventories of national biomass and other renewable energy resources. Finally, UNEP and the FCCC Interim Secretariat have jointly developed the Country Activities on Climate Change: Information Exchange System (CLIMEX) project to facilitate exchanges of information between countries and organizations working on global climate change issues.42 To summarize the preceding sections, the near-term options supportive of sustainable economic development that are commonly promoted by the UNEP, IPCC, and the signatories of Agenda 21, the FCCC, the Miami Summit Plan of Action, and other treaties and agreements include: * improved energy efficiency through better maintenance, repairs, operating techniques, upgraded systems and technologies, modem meter and control applications, and so forth; * the expanded use of cleaner energy resources and technologies, including low carbon fuels such as natural gas, renewable energy sources, combined-cycle and cogeneration technologies, and cleaner transport fuels and systems; * increased information-sharing programs for technological advances, technical training, relevant regulatory and institutional capacity-building, and so forth; and * greater development of open market policies, structures, and mechanisms that foster the maximum range of viable, cost-effective, and environmentally friendly energy options. In all of these areas, joint efforts to identify and allocate adequate funding resources and develop appropriate financing mechanisms are commonly promoted. 2. The World Bank and Other Programs For several years, the World Bank has followed guidelines published in two major policy papers to make energy projects-transcending the transportation, energy, urban infrastructure, and agricultural sectors-more environment friendly. Its approach is twofold: to improve efficiency on both the supply side and the demand side, and to promote clean technologies.43 42. Ibid. 43. See policy papers, "The World Bank's Role in the Electric Power Sector," The World Bank, Washington, DC, 1993, and "Energy Efficiency and Conservation in the Developing World," The World Bank, 1993. 30 LA T Regional Studies Program Report No. 42 Under these guidelines, the Bank has made more than twenty loans specifically supporting reforms to improve efficiency in all aspects of energy production and use, and many other loans have included independent energy efficiency components. Integrated resource planning, decentralization of authority to local governments, and incorporating cost recovery and demand-side management are integral parts of this approach. Moreover, reform at the macroeconomic level, strengthening the sector's institutional and regulatory frameworks, and promoting correct energy pricing measures founded on real economic costs are viewed as prerequisites to sustainable energy efficiency programs. Removing subsidies for fossil fuels and electricity consumption is expected to result in greater efficiency and conservation measures at the consumer level. The World Bank has provided technical assistance to various countries that promoted energy efficiency either directly or indirectly, including Mexico (power sector reforms, efficiency, cogeneration), Colombia (power sector reforms, efficiency), Peru (Electric Concession Law, efficiency), Bolivia (power and hydrocarbon sector reforms, efficiency, rural energy programs), Brazil (power sector reforms, efficiency), and the Dominican Republic (power sector reforms to enable private sector participation).44 Along with the IDB, European Union, and local chambers of commerce, the World Bank has also worked to formulate energy efficiency programs (for example, in Brazil, Peru, and Colombia) aimed at: optimizing market forces to enable viable projects in the industrial, commercial, residential, and agricultural sectors; creating institutional capacity and technical skills; and establishing vital information exchange programs to support the programs at both the local and national levels. Technical assistance and financing for pilot programs are provided by the Bank and other institutional supporters, with in-kind contributions made by host industries. More recently, the Bank has focused on how its rural energy strategy program can provide energy to rural villages in a pragmatic, sustainable manner that adapts to their individual features. After devoting years of study and careful analysis to the issue, taking into consideration the immense variation of rural energy development needs across regions, let alone countries, the Bank has presented its findings in Rural Energy and Development: Improving Energy Supplies for 2 Billion (World Bank 1996). The thrust of the conclusions are that these programs work best when local entities are involved in their design, implementation, and administration, and that new and different kinds of financing tools are needed to cover high start-up and fixed charges for low-income consumers (who should themselves cover the variable energy consumption costs). The study indicates that good synergies exist for World Bank alliances with NGOs, other regional banks, and development institutions to forge joint programs that can more effectively provide rural energy. The authors foresee the World Bank increasing its role as "information broker" on relevant energy technologies and financing programs. 44. "Banco Mundial: Politicas y Experiencias en Eficiencia Energ6tica," presentation by Dr. Anke Sofia Meyer, IEN, The World Bank, at the "Seminario sobre Eficiencia Energdtica: Experiencias Intemacionales y Estrategia para Bolivia" Santa Cruz, Bolivia, June 5, 1996. Pursuit of Sustainable Energy Development in the Americas 31 The Bank undertakes other initiatives in conjunction with the United Nations, the Global Environment Facility, the IDB, and other organizations.45 In particular, the joint UNDP/World Bank ESMAP effort has assisted in identifying appropriate strategies for electrification (including assessment of renewable energy potential), energy efficiency, and sector reform and restructuring in Bolivia, Brazil, Colombia, Ecuador, Guatemala, Jamaica, and many other countries in the hemisphere. ESMAP is also initiating regionwide "monitoring and targeting" programs. The Bank is also assisting its borrowers to expand energy supply capacity and to mitigate environmental degradation through the application of various clean technologies, including natural gas and clean coal, cleaner automotive fuels, modem pollution control equipment, and renewable energy sources. Finally, the "Solar Initiative" was launched by the Bank in 1995 to provide a vehicle for solar energy projects. Lead removal from gasoline is a broadly supported initiative at the hemispheric level involving the World Bank, IDB, OLADE, Latin American Petroleum Industry Mutual Aid Association, Pan American Health Organization, U.S. Agency for International Development, U.S. Department of Energy, the EU, and others. The World Bank supported a regional study that made an inventory of and analyzed leaded gasoline consumption and supply by country. It also included data on vehicle fleets, refinery schemes, institutional frameworks, and national programs for removal of lead. Ultimately, country technical assistance programs are expected to address air quality and pollution prevention issues. In addition, participating organizations and country representatives ("National Focal Points") will work together on a regional trade promotion effort and will undertake joint procurements. Other assistance is being given for refinery conversion, alternative transportation fuel studies, and public education programs. The World Bank, IDB, UN, and other multilateral organizations provide additional knowledge and expertise through the active participation of its representatives in national and international workshops, seminars, and conferences, and in the numerous informal discussions that occur at these events. As a recent example, key experts on energy efficiency were dispatched from the World Bank to attend the seminar on "Eficiencia Energitica: Experiencias Internacionales y Estrategia para Bolivia. " Bank staff also participated at several levels in discussions on an energy efficiency action plan-incorporating capacity-building as well as pilot projects in industrial, transportation, electricity, and other applications-and on proposals for an energy investment fund, ESMAP II initiative, Rural Energy Program, and the initiation of a monitoring and targeting program in Bolivia. 45. Mainstreaming the Environment, The World Bank, 1995.  Bibliography World Bank Sources "Banco Mundial: Politicas y Experiencias en Eficiencia Energetica," presentation by Dr. Anke Sofia Meyer, IEN, The World Bank, at the "Seminario sobre Eficiencia Energetica: Experiencias Internationales y Estrategia para Bolivia" Santa Cruz, Bolivia, June 5, 1996. "Banco Mundial y la Iniciativa de Energia del Hemisferio," presentation by Dan Biller, The World Bank, at the Hemispheric Meeting of Energy Ministers, Santa Cruz de la Sierra, Bolivia, July 30-August 2, 1996. "Bolivia: Proposed Rural Electrification Credit: Back to Office Report," Jorge Gorrio and Ernesto Terrado, The World Bank, Washington, DC, April 9, 1996. "Consequences of Energy Policies for the Urban Poor," Douglas Barnes, Energy Issues, FPD Energy Note No. 7, The World Bank, November 1995. "Elimination of Lead in Gasoline in Latin America and the Caribbean," presentation by Chakib Khelil, The World Bank, at the Workshop on Capital Investment inthe Petroleum Refining Industry, June 6, 1996. "Energy and Environment Issues: An Overview," Rafael A. Moscote, The World Bank, presented at ENERLAC '96 in Rio de Janeiro, June 1996. Energy Efficiency and Conservation in the Developing World, The World Bank, 1993 "ESMAP Project Bolivia: Energy Efficiency Program, Back to Office Report," by Anke Meyer and Salvador Rivera, The World Bank, June 20, 1996. Mainstreaming the Environment, The World Bank, 1995. Power and Energy Efficiency: Status Report on the Bank's Policy and IFC's Activities. Joint World Bank/IFC Seminar, July 7, 1994. Reforms and Private Participation in the Power Sector of Selected Latin American and Caribbean and Industrialized Countries, LAT Regional Studies Report No. 33, The World Bank, March 1994. Rural Energy and Development: Improving Energy Supplies for 2 Billion, The World Bank (IEN, Best Practice Paper), July 1, 1996. The Power Sector in LAC: Current Status and Evolving Issues, LAT Regional Studies Report No. 35, The World Bank, June 1995. The World Bank's Role in the Electric Power Sector, The World Bank, Washington, DC, 1993 "World Bank Statement to the Hemispheric Energy Symposium Steering Committee," Rafael A. Moscote, The World Bank, presented in Rio de Janeiro, April 29, 1996. 34 LA T Regional Studies Program Report No. 42 Other International Organizations "Declaracion de Santa Cruz de la Sierra," Joint Declaration of the Hemispheric Meeting of Energy Ministers, Santa Cruz de la Sierra, Bolivia, July 30-August 2, 1996. Energia y Desarrollo Sustentable en America Latina y el Caribe (Version Preliminar), OLADE/DEPAL/GTZ, OLADE, Quito, Ecuador, May 1996. "Energy Conservation in Brazil," M.J. Marques, J.B. de Hollanda, M.T. Tolmasquim. Technical Papers, World Energy Council, Brazilian Committee, WEC 16th Congress, Tokyo, Japan, October 8-13, 1995. Energy, Technology and Developing Countries: A Study of Four Countries [DRAFT], International Energy Agency, Paris, 1995. Estrategia de Energia Rural, Ministerio de Desarrollo Economico, Secretaria Nacional de Energia, La Paz, Bolivia, December 1994. "PRODEEM: Energy for Social and Rural Development," Ministirio de Minas e Energia - Secretaria de Energia, Departamento Nacional de Desenvolvimento Energ9tico, Brasilia, 1996. UNEP Collaborating Centre on Energy and Environment/Riso National Laboratory (Denmark), Proceedings, "Conference on National Action to Mitigate Global Climate Change," June 7-9, 1994. Selected presentations from this conference used to prepare this paper were: - "An Overview of International Actions to Deal with the Climate Change Problem and the Scientific Update," Peter Usher, Climate Unit, UNEP (Nairobi). - "Biomass Energy Development and Carbon Dioxide Mitigation Options," D.O. Hall and J.I. House. - "Renewable Energy Technologies as an Option for a Low-Carbon Energy Future for Developing Countries: Case Examples from Eastern and Southern Africa," Stephen Karekezi. - "Strategies to Mitigate Climate Change in a Sustainable Development Framework," Ogunlade R. Davidson. - "The Regional Response to the Greenhouse Issue: Latin America and the Caribbean," by Francisco J. Gutierrez, OLADE. Pursuit of Sustainable Energy Development in the Americas 35 Other Publications "A Hemispheric Commitment to Energy Efficiency," a Discussion White Paper prepared for the U.S. Department of Energy for the Energy Efficiency Strategies session of the "Hemispheric Energy Symposium," Washington, DC, October 29-31, 1995. "Energy Efficiency Strategies," White Paper prepared for the U.S. Department of Energy, for the Hemispheric Energy Summit, October 29-31, 1995. Global Climate Change Mitigation through Cogeneration: A Market Assessment of Cogeneration Project Opportunities in Key Developing Countries, G. Kadagathur, R. Gale, S.B. Maia, et al. USAID Project No. 936-5378, June 1992. "Indian delegation seeks the sun," DOE This Month, July 1996, page 5. "New Process May Give Coal-Fired Electric Plants a Lift," Daniel Southerland, The Washington Post, September 6, 1995, p. G-1. "O'Leary turns on sun's power at solar plant," DOE This Month, July 1996, page 5. "Potential for Zero-Peak-Power Housing in California," Project Highlights, California Institute for Energy Efficiency (CIEE), 1996. "Power to the People: A Survey of Energy," The Economist, June 18, 1994. "Subtrans: Automation for Freight Transportation" and accompanying note, "The Future of Our Transportation Infrastructure" presented by William Vandersteel (Ampower) at "Connections: The Change of Multimodal Transportation" Third Annual Greater Seacoast Economic Summit, June 1-2, 1993. The Framework Convention on Climate Change, 1992. The Miami Summit Plan of Action, 1994.  Other Reports in the Regional Studies Program Series: No. 30: Indigenous People and Poverty in Latin America: An Empirical Analysis, LATAD, August 1993. No. 31: Labor Market Legislation in Latin America and the Caribbean, December 1993. No. 33: Reforms and Private Participation in the Power Sector of Selected Latin American and Caribbean Industrialized Countres, Vols. I and II, LATAD, March 1994. No. 34: Government and the Economy on the Amazon Frontier, LATEN, May 1994. No. 35: The Power Sector in LAC: Current Status and Evolving Issues, LATAD, June 1995. No. 36: Infrastructure and Growth: the Latin American Case, LATEA, January 1996. No. 37: Sustaining Safety and Soundness: Supervision, Regulation, and Financial Reform, LATEA, January 1996. No. 38: Effective Financing of Environmentally Sustainable Development in Latin America and the Caribbean, LATEN, January 1996. No. 39a: Argentina: Mutual Fund Regulation, LATAD, October 1996. No. 39b: Argentina: Mutual Fund Industry, LATAD, October 1996 No. 39c: Brazil: Securities Portfolio and Investment Fund Regulation, LATAD, October 1996. No. 39d: Chile: La Regulacion de los Fondos Mutuos, Fondos de Inversion y Fondos de Inversion Extrajera, LATAD, October 1996 No. 39e: Chile: Los Fondos Mutuos, LATAD, October 1996 No. 39f: Colombia: La Regulacion de los Fondos de Valores, LATAD, October 1996 No. 39g: Mexico: Mutual Fund Regulation, LATAD, October 1996 No. 39h: Peru: Mutual Fund Regulation, LATAD, October 1996 No. 40: Sustainable Agriculture and Poverty Reduction in Latin America's Risk-Prone Areas: Opportunities and Challenges, LATEN, October 1996. No. 41: Infrastructure in LAC: Investing in the Future, LATDR, November 1996.