Mr. Chairman:
Good morning, ladies and gentlemen. It is my pleasure to present to you this morning
some of the main messages we heard during the World Bank Energy Week 2006 held in
the first week of March. I will try to briefly summarize what our outstanding panelists ?
those at the forefront of these issues ? articulated so thoroughly.
The topic of this year?s Energy Week was Clean Energy for Development, and we were
able to listen to and discuss many issues and ideas reflected in the core themes of: Energy,
Poverty and Africa; Clean Energy and Low Carbon Solutions; Energy Security; and
Governance and Anti-corruption.
Looking back, I can?t help but think that it was not a coincidence that this year?s event
was our largest Energy Week ever, with over 1,000 people in attendance. Rather, it was
the simple fact that world demand for energy is expanding more rapidly than ever, energy
prices are high and volatile, the environment is suffering, and 1.6 billion people still do
not have access to electricity.
And nowhere else in the world are these problems more apparent than in Africa. Indeed,
for those of us in the development community, Africa has been at the top of our minds
lately because we know how critical ene rgy is for economic growth and poverty
reduction.
As World Bank President Paul Wolfowitz said in his keynote address, we face a
particular challenge?as well as an opportunity?in Africa. Access to the electricity grid
in Sub-Saharan Africa has slowly increased, from 9 percent of the population in 1970 to
23 percent in 2005. But 23 percent is nowhere near enough.
Another statement I heard, one which I will not forget anytime soon, came from Minister
Van Ardenne, the Dutch Minister for Development Cooperation, who succinctly pointed
out that ?Africa's night is dark, because only a quarter of its people have electricity.? As a
speaker from Mali justly stated, ?light means freedom?. This is more than a century after
the invention of the light bulb. Africa is and must remain a priority for all of us.
The good news is that Africa has substantial hydropower and other resources that can be
harnessed to produce energy needed for economic growth and fighting poverty. The bad
news is that investment is not where it should be, but we are seeing growth coming back
in Africa.
While donor aid to Africa is growing, the challenge is to coordinate this aid and translate
it into results. To do this, the Bank will work with other partners to help scale up
investments, which will be designed to match the individual circumstances of each
country in terms of local resources, demography, and location.
Africa has great potential and the ability to increase development and sustainability and
meet the MDGs. For all of us this is, of course, welcome and encouraging news, but this
is dependent on good African policies and political support.
Moving beyond Africa, Energy Week helped us confirm what we already knew: that in
order to meet the developing world?s growing energy demand, clean energy is going to
be key.
OECD countries are scheduled to replace over a third of their existing power plants by
the year 2030, including nearly all coal-fired plants. The IEA has estimated that
developing and transitioning countries will need to invest about $300 billion dollars
annually, from today until 2030, to meet their energy requirements. Most importantly, in
2030, if no new policies are implemented, there will still be 1.4 billion people without
electricity.
Make no mistake, there is no single solution for a sustainable energy future, and there is
absolutely no time for perfection in policy! We need a broad portfolio of clean energy
options to address the challenge ahead, and energy efficiency must be included within
this portfolio. It is the ?low hanging fruit? and is an option that is immediately available
with existing technologies.
Fortunately, it turns out more and more, that the private sector is buying into these issues,
and that the renewables market is now populated by those wishing to make money, not
just those concerned with improving their corporate image. This is real progress! But
institutiona l barriers still need to be addressed, government and NGO support is critical,
as is the ability to restrict market interference and eliminate red tape.
Energy Week also was timely in terms of the issue of energy security and the impact of
soaring oil prices, because it helped demonstrate that there is a common interest for all,
producers and consumers alike, in coming together to help achieve energy security. The
tremendous impact of fluctuations in oil prices, especially on the poor, and the way
governments cope with these, cannot be understated.
The precise meaning of energy security varies according to count ry circumstances. For
energy producers, it is the ability to secure, long term and attractive markets for their
natural resources that often underpin their economies. For the major industrialized, it is
the continuing supply of energy that drives their economies and supports a high and
growing quality of life and economic growth. For poor countries, it is a vital ingredient in
their paths out of poverty. Energy increases poor people?s productivity and incomes;
lighting and power improve their health and enable them to participate in education, and
helps them connect to the global market.
But in the last few years energy security has become a two-edged sword: it is an
important component of economic growth by driving efficiencies through productivity
gains, while pushing some over the poverty threshold because of the impact of high
prices.
Volatile and high oil prices disproportionately impact poor net oil importing developing
countries. Poverty reduction is linked not only to the provision of modern energy
services, but also to energy security. The energy poor are the most vulnerable to
shortages in fuel availability and to fluctuations in the quality of fuel or energy service
standards.
The recent increase and volatility in oil prices have affected poverty indicators across a
broad range of developing countries. The estimated increase in the number of people in
poverty has risen by as much as 4-6% as a result of the current price surge, with nearly 20
countries experiences increases of over 2%. The poor suffer relatively more tha n other
income groups from contaminated fuel such as kerosene and from voltage fluctuations
that damage their electricity appliances which they cannot afford to repair.
At the macro level, a number of countries combine high energy intensities with a heavy
reliance on imported oil as the main source of energy. For these countries, the 2005 oil
price hikes are estimated to imply increases in their oil bills of more than 3% of GPD and
as high as 10%. The 72% increase in oil prices from 2003 to mid-2005 has cost African
net oil importing countries a cumulative loss of GDP of around 3.5%. The burden of this
cost falls heavily on the poor, both directly through higher fuel and electricity prices, and
indirectly through diversion of fiscal resources from social programs that benefit the poor.
When oil vulnerability among oil importers is examined across different regions, Africa
has one of the highest vulnerability levels despite its low energy intensity. The
vulnerability to oil price shocks in Africa is expected to worsen in the medium term as
income rises because many countries do not have oil production, and other commercial
energy sources such as coal, hydro, and natural gas are limited. For example,
vulnerability more than doubled in Malawi, Ethiopia and Burundi between 1990 and
2003.
Equally as important is the management of increased oil revenues that are also a result of
this trend. Energy security is an issue that is critical to the Bank?s client countries in
various regions, and we will continue to focus on this issue.
Our other core theme for this year?s Energy Week was the issue of corruption and energy.
Infrastructure is particularly vulnerable to corruption, but despite very promising changes
in the last 10 years ? and especially the last 2-3 years - corruption is one of the major
reasons why people remain in poverty, poor health and why infrastructure costs are much
higher, poorly built, and badly located.
I want to emphasize that the World Bank Group not only takes this issue seriously, but is
fighting corruption in the energy sector, and doing so with success. For example, we have
helped countries in Eastern Europe and the former Soviet Union improve their billing and
cash management systems. We?ve supported Indonesia?s reform of procurement practices
and we?ve helped India and Bangladesh reduce electricity theft. We will continue
addressing this challenge head on.
We know there is no silver bullet for the issues I?ve just discussed, but we need to look at
the energy challenge ? not just in Africa ? but in all parts of the world, from a variety of
perspectives including the energy security, clean energy and anti-corruption agendas, and
mobilize resources with this approach in mind. This will take political commitment, and
substantial resources to back that commitment.
Thank you.
