101635

Remarks on the Environment at the Brookings Institution




By
James D. Wolfensohn
President
The World Bank Group
Washington, D.C., June 25, 2004


I'm finding that I'm getting so old in relation both to Brookings and to
the environment.   I was with Maurice Strong in Stockholm at the
beginning of the environmental international activities when we first
started to talk about climate change, and so I come here in front of you
as an almost antediluvian representative, but one who has the privilege
of representing an institution where we take this issue very, very
seriously, and where I'm delighted to have the chance to remind you that
the issue is related to development.

All of you I think know that the Bank is concerned with the five billion
people in the world out of six that are in developing countries and that
have roughly 20 percent of the wealth compared to the 80 percent of the
rich countries. You're aware that in the next 25 years, as the world
grows from six billion to eight billion and in 25 years' time we'll have
seven billion out of eight billion in developing countries, and roughly
50 million only will be added to the rich world. And 50 years hence, it
will be eight billion out of nine. So at least we have a growing market
in the work of the Bank, but also some growing problems and also, of
course, growing opportunities.

During that time, just to give you the economic base, it is likely, as we
project, that instead of six to seven trillion dollars a year of income
of a global income stream of $34 or $35 trillion, roughly 20 percent of
the share of global GDP by 2050 will be 40 percent. And on sort of 3-
percent growth figures averaged up to 2050, we will at that stage have a
$150 trillion global economy. And you'll have $60 trillion in the
developing world, up eight times, if you like, of what it is today.

The reason I'm giving you these statistics is that as you get economic
activities and you get use of energy and as you get economic activity
related to proliferation of people, and a new issue which is that you'll
have in that same period of the next 25 years when you have growth of two
billion, two billion more people moving into cities and towns, where you
will have tremendous additional pressure on both the environment and on
energy needs, that is the environment in which we are looking at the
question of climate change and sustainable development. It is not
static, and the growth is all in terms of people in the developing world.
And so you need to have that in the back of your minds as you listen to
what we are trying to assert now, which is that the issue of climate
change has a disproportionate effect on those people who are vulnerable
and who are in the developing countries that we represent.

I think it's not necessary for me to tell you how much of the Greenhouse
Gas Emissions come from the rich world. It is most of them. I don't
need to give you the background of Kyoto because I understand that that
was more than adequately covered yesterday, and you know about it,
anyway. But from the point of view of the developing countries, these
are countries which are marginal where a substantial portion of the poor
are in rural areas, and where issues like deforestation, like changing
weather patterns that cause for less than optimum usage of land, indeed
degradation of land, where air pollution has a significant impact on
people, and where also the biodiversity is really significantly affected,
not just for the developing countries but for the world itself, that we
necessarily are quite concerned about the impact of climate change on
these vulnerable people.

I think you also know that there are many parts of the world in which the
actual level of the countries themselves are being challenged, for those
of you that have been in the Maldives or in Bangladesh, you will know
that the issue of climate change in those countries is not just a
question of increase or decrease of standard of living; it is a question
of whether you have somewhere to live at all.

My son, who's a film maker, has just come back from Alaska, and he tells
me that he's just seen an Eskimo village in Alaska that has also been
affected by it. So we have the issue in the developing countries of
physical existence in some of the countries, in some of the island
states, but we have all particularly the issue of economic activity and
distortions of economic activity brought about by changes in weather
patterns and brought about by changes in water flows and brought about by
the immediate impact that this has on the whole economic environment in
which people live.

This is dramatic in many of the countries, but for those of you that have
traveled and have seen the degradation in land and the acute difficulty
which faces people in terms of land use, you will understand that for us
the question of climate change is not a theoretical question. It's one
that is of an immediate and huge impact in terms of the developing world.

I participated in a Security Council meeting on some aspects of this, and
as you know, some people have said that this is as big an issue for the
developing world as are some of the more physical threats, be they terror
or wars. And I actually believe this. It's very hard to put a number on
it, what a two- or three-degree variation or a three-degree variation
would lead to in terms of loss of GDP. About the only statistic that Bob
Watson can give me--they're usually pretty wild statistics that Bob
Watson does give me. But he tells me that it should be between 2 and 9
percent of GDP. Well, that's a pretty good range. But even a 2-percent
variation in GDP per annum in countries of the type that we're talking
about is huge. And in some countries, there is no doubt that the impact
of climate change is quite, quite dramatic.
What is it that we can do about it? Well, it's clear that the developing
countries, again, as I think we discussed yesterday, can do quite a lot
in terms of conservation and in terms of better policy and in terms of
research. After four or five aborted attempts to meet with US Energy
Secretary Spencer Abraham, I had a one-on-one with him by coincidence
this morning. And I'm quite happy now, if you like, to make Spencer's
speech to you that he gave to you yesterday, because I got it this
morning.

I heard about what it is that we should do in terms of massive research
and quantum change, in addition to work on renewables and work on better
policies. And so why don't you take it that I understand what he said
and I've just made it again.

But how we can do that and how quickly we can do that is, of course, a
big issue. We would love to have a hydrogen solution. We would love to
have a fusion solution. We would love to have atomic energy that is
safe. But I think at the moment what we're looking at in terms of
developing countries which are endowed significantly with coal and, to
some degree, with oil and gas is that, looking forward in the countries
in which we're operating, for the foreseeable future the issue that's
going to be facing us is the issue of hydrocarbons. We'd love to have
gas. We all know that that would be better. And in the recent report of
the respective industries that Emil Salim gave, he is recommending that
the Bank should get out of coal and oil and that we should put our
efforts into renewables. And I have over the last months paid a lot of
attention to the renewables issues. And we've had reports on everything
from solar to wind to geothermal to tidal. And I've been out to see
these things.

But the bottom line is that currently that's 2 percent of global energy
supply--2 percent. And if we could take it to 3 or to 4 or to 5--and 5
is already beyond the range that anybody has projected over the next 15
to 20 years, that would be a great thing to do. And we propose to get
into doing that. But the issue for us does not seem that renewables is
the immediate answer at any rate. And to that extent, I think what
Spencer Abraham said is right. There is a need for technology.

But I think what we are looking for in the countries in which we're
operating and are proposing in the rich world is that all the science and
technology should proceed as at tough a pace and as vigorous a pace as is
possible to bring about a breakthrough, because clearly a breakthrough
would be wonderful; but that in the meantime, what we need to do is to
try and modify policies, try and save as much energy usage as we possibly
can, and try and clean up the act in terms of carbon.

We have one other problem, which is this, which is somewhere around a
couple billion people, 300 million either way, don't have any energy at
the present time at all. And so poor people themselves constitute an
issue in terms of deforestation. Because if you have no energy, you go
out and cut down the nearest tree, and that is bad for the environment.
It's also bad economically because it's wasting the time of people. And
then the women are also burning biomass, and we estimate that a couple of
million of them are killing each other themselves over every year because
of disease that comes from inhalation of the noxious fumes and things
that go along with the burning of biomass in a small space.

Poverty, unfortunately, impacts forestry and impacts the environment in
which we live. And so for us, getting electricity or getting some form
of power to the poor community is in itself an advantage even if it is
brought by coal-fired plants.

Now, this leads, of course, to the question of cleaning up and the
advances that we can make on the use of coal and oil in the generation of
electricity. And there the need to clean up the plants that I think many
are doing, including the Department of Energy in this country, to try and
get clean coal is a parallel activity that I think--that we hope must
continue as we move forward in terms of our efforts in developing
countries.

But the notion that any report or any admonition by rich countries to
poor countries that they should not use the coal reserves that they have
is sheer fantasy. It's not going to happen. It might be wonderful and
it might be a great thing in terms of the environment, but our clients
say to us, look, you rich guys created this problem. You are profligate
in the use of your energy. You, too, burn these fuels, and now you're
telling us, as we move, as I remind you, from $7 trillion to $50 trillion
in terms of economic activity, that we can't do that. We are the ones
that have to say the problem, while you have no policy and while you're
profligate and while you're not spending your money adequately on trying
to clean up the act of how we generate electricity. We would love to have
hydrogen and we would love to have fusion and we would love to have all
these great things that we're talking about, but don't put it on us. And
we'd also love to have renewables, and we will use renewables, but there
is a cost factor. And we're more than happy to try and deal with it, but
please, please, please, if we're going to use renewables, bring down the
cost and bring it to a point that it can be attractive to us, because,
remember, we're poor, we're not rich. And that is what we face every day
when we go out and try and do the work we're doing.

So I was anxious to come when I was asked because I think the issue of
developing country confrontation with the question of climate change is,
first of all, very real. And this is the group that is most vulnerable,
particularly to changes in temperature and water supply. It leads to the
unfortunate result that the arid and semiarid areas typically get worse
and, therefore, affect the production of agricultural products. It leads
to questions of distortions in the developing countries which are
vulnerable and where the poorest people find that their economic activity
is most influenced. Where we face the huge challenge of bringing clean
water to the one and a half to two billion people that don't have clean
water, sanitation to the two billion or so that don't have sanitation.
Where it leads us to try and deal with waterborne diseases which are
affected by climate change, and where the developing countries are saying
to us, For God's sake, help us, but we're not the cause of this problem.
We are contributing to it, but we need a better partnership and a better
policy with the rich countries.
This is where we're at in the debate, and speaking on behalf of the five
billion, it's not such an arrogant or distorted request to be making. So
they're looking for research, they're looking for better policies, and
they're looking for partnership. And they're doing it from the point of
view that reflects their vulnerability. But what they're not looking for
are lectures on "Don't use coal and don't use oil and don't use your
natural resources." And they react rather badly to these sorts of
suggestions.

So in the middle of all this, we're trying to weave a path which allows
for the best use of renewables, which allows for appropriate partnerships
on the extraction of minerals and oil and coal. We are looking to try
and find the best ways to use renewables at some moderate cost. But the
bottom line for us is that this is a huge question in the issue of
development. I think it is less felt than it should be in most sectors
of the community, though I'm sure in this room you understand it. It is
a real crisis for developing countries. The issue of climate change
affects them more than it does us. It is more than an inconvenience on
holidays or on change of climate. It is a question of existence. And
I'm very grateful that this group and Pew are anxious to keep our
attention focused on this subject, because there is no way that we can
reach the Millennial Goals for poverty or for development without
addressing the question of climate change and the environment.

This is not a fringe issue for us. This is a central and, frankly, less
understood issue than it should be. And for those reasons, I'm very glad
to have been invited here to remind you of things that you probably
already know, but it makes me feel better to tell you.

So thank you very much.

[Applause.]

MR. WOLFENSOHN:   In the front row there.

QUESTIONER: I work at the Environmental Defense Fund. I'm afraid I want
to put to you one of those terrible "I would have thought" questions.

MR. WOLFENSOHN:   Please.

QUESTIONER: I watched from some distance the Bank struggling with the
Salim issues, and I hear in your own words the alternatives, simplifying
a little, invest in renewables versus invest in hydrocarbons. And what I
would have thought is that there is a clearer long-term path, as you head
one of the few institutions in the world that can think in terms of
decades, which is a tremendous advantage in these issues. Climate is an
issue of decades, and we do have a window with some latitude [inaudible]
very precious.

I would have thought it would have been possible to define the road
forward as not renewables versus fossils, but as--and since the Bank must
invest in energy, since energy is so much part of economic development,
one way or another you must be in the energy business. I would have
thought the way to define the way forward is that the Bank will invest in
energy where that is decoupled from carbon [inaudible] decoupled a
generation of energy and the growth of economies from the growth in
emissions of SO2. We did it a while go in many parts of the world where
we decoupled the production of gasoline from lead in gasoline. And by
defining it that way, it makes it more likely that the developing world
will not have to go through the long industrial winter, or summer, if you
wish, that the North went through. It will certainly take you through
the path of clean coal, or in some cases take you through a path which
may be more expensive coal.

But I would have thought that would be a defensible long-term strategic
and economic goal and would sort out some of the nearer-term agonizing
issues.

MR. WOLFENSOHN: Well, long term, I would agree with that as a statement
of policy when you give me an answer to economic clean coal. The reason-
-first of all, we have just come out of the Salim report, which has a lot
that's very good in it. I remind you that the Salim report deals not
only with the issue of emissions, it deals also with the question of how
energy companies should operate in developing countries in terms of
protecting the rights of people, in terms of ensuring that affected
people get some share of the income, issues of transparency, all of
which, I think, now have gotten considerable agreement on.

So before I get to the question of emissions, there is a whole series of
stuff that we agreed on with the Salim report. What Salim asked was for
us to pull out completely of the coal and oil business, and we're not
very much in them, anyway. But the reason that we believe we should stay
in is that we frankly think that when we're in, we get better
developments that are more equitable and much more favorable to the
environment than when we're not. And that's very clear because we insist
on environmental impact statements, we insist on dealing with the
questions of every aspect of environment [inaudible] now human rights and
the rights of indigenous people and local communities.

And for that reason alone, I am anxious to stay in because if we pull
out, we cannot influence the major companies in terms of the way in which
they do their job in extraction. And I just recently have been in the
Niger delta, where--actually, to put a question of "I would have hoped,"
I would have hoped that the Niger delta might have been a better form of
development in terms of the environment, in terms of the people. So what
we're trying to do is to deal with that issue.

Now, what we're certainly not doing is promoting the use of power plants
that put out emissions. Within the framework of existing technology, we
have always opted for the cleanest technology. And we seek to insist on
the cleaner technology. In fact, we've closed down quite a lot of plants
and we've closed down quite a lot of mines in India because of the
emissions and because of the environmental impact.

But although it's a long-term goal to only act in those cases where there
are no emissions, it is not currently either technically or economically
possible. And so while not promoting the use of coal for poor emission
standards, quite the contrary, the use of coal only where you can use the
maximum of current technology. We're sort of waiting for technology to
catch up with us. And at the same time, we're putting--have agreed to
put everything that we can, both ourselves and in bringing together some
sort of global communion, on the question of renewables.

That's where we're at at the moment, but there is a 30-day comment period
and an e-mail address, and we'd love to get your views. And I'll send
you a copy of the report. And, frankly, if you think we've got it wrong,
I'd welcome your comments. But we're trying at the moment to meet a
short-term reality within the framework of a long-term objective, which
is the one that you enunciated.

Thank you all very much.